VOLVO GROUP

ANNUAL AND SUSTAINABILIT Y REPORT

2019

PERFORM AND
TRANSFORM
 A GLOBAL GROUP 2019 OVERVIEW

DRIVING
PROSPERITY
Every company exists for a reason – it has a purpose. Our solutions to global
challenges are driven by our mission to drive prosperity through transport
solutions and our vision to be the most desired and successful transport
solution provider in the world. We continuously develop our products and
services to create value for our customers and to support sustainable soci-
eties and the well-being and safety of people.

OUR CUSTOMERS MAKE SOCIETIES WORK

The Volvo Group’s products and services contribute to much of what we all expect of a
well-functioning society. Our trucks, buses, engines, construction equipment and financial
services are involved in many of the functions that most of us rely on every day. The major-
ity of the Volvo Group’s customers are companies within the transportation or infrastruc-
ture industries. The reliability and productivity of the p
­ roducts are important and in many
cases ­crucial to our customers’ success and profitability.

ON THE ROAD
Our products help ensure that
people have food on the table,
can travel to their destination
and have roads to drive on.
We calculate that 15% of all
food in Europe is delivered by
a truck from the Volvo Group.
Our products also deliver goods
to keep production plants
­running.
A GLOBAL GROUP 2019
OFF ROAD
Engines, machines and vehicles
from the Volvo Group can be
found at construction sites, in
mines and in the middle of
­forests. They are used to mine
iron ore, transport lumber or
haul stone and rock. Our indus-
trial engines power vital irriga-
tion installations at agricultural
sites all over the world, so that
farmers can grow their crops.
OVERVIEW
IN THE CITY
Our products are part of daily
life. They take people to work,
collect rubbish and keep lights
shining. Our buses and public
transport solutions help people
get to work or to school. Our con-
struction equipment is used to
build housing as well as indus-
trial and sports facilities.
AT SEA
Our products and services are
there, regardless of whether
someone is at work on a ship,
traveling to work on a ferry, on
holiday in a pleasure boat or
need urgent help from the sea
rescue services. The Volvo Group
has marine engines for a broad
range of applications.
1
 A GLOBAL GROUP 2019 OVERVIEW

A GLOBAL GROUP
The Volvo Group is one of the world’s leading manufacturers of trucks,
buses, construction equipment as well as marine and industrial engines.
The Group also provides complete solutions for financing and service.
With its headquarters in Gothenburg, Sweden, the Group employs
100,000 people, has production facilities in 18 countries and sells its
products in more than 190 markets.

Competitive products
The Volvo Group’s products have been developed to contri­bute to efficient transport and
infrastructure solutions and to provide our customers with uptime. We drive the develop-
ment of electrified vehicles and machines as well as automated solutions for the benefit of
customers, society and the environment. Sales of new vehicles, machines and engines as
well as used vehicles and machines, superstructures and special vehicles accounted for
77% of the Group’s net sales in 2019. Sales of vehicles and machines build a population
of ­products that drives spare parts sales and service revenue.

World-class ­services
In addition to vehicles and machines, the offering includes various types of services such
as insurance, rental services, spare parts, repairs, preventive maintenance, service agree-
ments and assistance services. The range and flexibility of the offering means that the
solutions can be tailor made for each customer to maximize uptime and productivity. The
service business contributes to balancing the fluctuations in the sales of new products and
is an area of priority. Sales of services accounted for 20% of net sales in 2019. The Group
also offers financing for customers and dealers. Financial Services provided financing for
25% of the products sold by the Group in 2019, measured in the markets where financing
is offered.

Strong p
­ ositions globally
Thanks to competitive product programs, strong dealers with extensive service networks
and increasingly more complete offerings, the Volvo Group has established leading posi-
tions on a global market. The Group is one of the world’s largest manufacturers of heavy-
duty trucks, construction equipment, buses and heavy-duty diesel engines as well as a
leading supplier of marine and industrial engines. These positions provide for economies
of scale in product development, production, purchasing and financial services.

Strong brands
The Volvo Group’s brand portfolio consists of Volvo, Volvo Penta, UD Trucks, Terex Trucks,
Renault Trucks, Prevost, Nova Bus, Mack and Arquus. We partner in alliances and joint
ventures with the SDLG, Eicher and Dongfeng brands. By offering products and services
under different brands, the Group addresses many different ­customer and market seg-
ments in both mature markets and growth markets.

2
 A GLOBAL GROUP 2019 OVERVIEW

VOLVO GROUP MARKET EUROPE

24.2%
SHARES IN HEAVY-DUTY
TRUCKS
NORTH
AMERICA JAPAN

16.2% 18.5%
BRAZIL

22.5%

SHARE OF NET SALES SHARE OF NET SALES SHARE OF NET SALES

BY SEGMENT BY REVENUE TYPE BY MARKET

Trucks, 64%
Vehicles, 77% Europe, 38%
Group Functions & Other,
2%
Financial Services, 3%
Financial Services, Africa and Oceania,
3% 6%
Services, 20%
Volvo Penta, 3%
Asia, 19%
Buses, 7%

Construction South
Equipment, America, 7%
21%
North America,
30%

3
 A GLOBAL GROUP 2019 OVERVIEW

CONTENT

A GLOBAL GROUP
OVERVIEW
This is the Volvo Group . . . . . . . . . . 1
2019 in brief . . . . . . . . . . . . . . . . 5
CEO comments. . . . . . . . . . . . . . .6
STRATEGY
Contributing to a better world. . . . . . 8
Bringing our strategy to life. . . . . . . 10
The journey continues. . . . . . . . . . 12
Perform and transform . . . . . . . . . . 13
Seven strategic priorities . . . . . . . . 14
CASE
Electrification. . . . . . . . . . . . . . . 20
Automation . . . . . . . . . . . . . . . . 24
Connectivity . . . . . . . . . . . . . . . 28
OUR ROLE IN SOCIET Y. . . . . . . . . . 32
VALUE CHAIN. . . . . . . . . . . . . . . . 38
Customers. . . . . . . . . . . . . . . . . 44
Product development . . . . . . . . . . 48
Purchasing . . . . . . . . . . . . . . . . 54
Production & Logistics . . . . . . . . . 56
Retail & Service . . . . . . . . . . . . . 60
Reuse . . . . . . . . . . . . . . . . . . . 62
EMPLOYEES . . . . . . . . . . . . . . . . 64

GROUP PERFORMANCE
BOARD OF DIRECTORS’ REPORT 2019
Global strength. . . . . . . . . . . . . . 70
Significant events. . . . . . . . . . . . 72
Financial performance. . . . . . . . . . 74
Financial position. . . . . . . . . . . . . 77
Cash flow statement. . . . . . . . . . . 82
Business Areas. . . . . . . . . . . . . . 84
Financial management . . . . . . . . . 97
Changes in consolidated
shareholders’ equity. . . . . . . . . . . 98
The share. . . . . . . . . . . . . . . . . 99
Risks and uncertainties . . . . . . . . 102
Sustainability Reporting. . . . . . . . 110
NOTES
Notes to the financial statements . . 113
Parent Company AB Volvo. . . . . . . 176

CORPORATE GOVERNANCE
Corporate Governance Report 2019. 188
Board of Directors . . . . . . . . . . . 196
Group Executive Board. . . . . . . . . 202

OTHER INFORMATION
Proposed remuneration policy. . . . 206
Proposed disposition of
unappropriated earnings. . . . . . . . 208
Audit report for AB Volvo (publ). . . . 209 The Volvo Group’s formal financial reports
Key Ratios. . . . . . . . . . . . . . . . 212 are presented on pages 70–187, 206–208
Eleven-year summary . . . . . . . . . 215 and 212–214 and have been audited by the
GRI content index. . . . . . . . . . . . 224 ­company’s auditors. For information on
Annual General Meeting. . . . . . . . 227 which pages constitute the Volvo Group’s
Preliminary publication dates. . . . . 227 ­Sustain­ability Report, please see page 110.

4
 A GLOBAL GROUP 2019 OVERVIEW

2019 IN BRIEF

INCREASED SALES
AND IMPROVED
PROFIT­ABILITY
• Higher vehicle and service sales contributed to • Strong financial position with net financial
net sales increasing by 11% to SEK 432 billion assets of SEK 62.6 ­billion in the Industrial
(391). Currency-­adjusted net sales grew by 5%. Operations, excluding provisions for post-­
emplyment b ­ enefits and lease liabilities.
• Adjusted operating income improved to
SEK 47,910 M (40,660), c­ orresponding to • The Board of Directors proposes an ordinary
an adjusted operating margin of 11.1% (10.4). ­dividend of SEK 5.50 per share (5.00) and an
extra dividend of SEK 7.50 per share (5.00).
• Operating cash flow of SEK 38.3 billion (26.6)
in the I­ ndustrial Operations. • Volvo Group and Isuzu Motors intend to form
­strategic alliance.

K E Y R AT I O S 2019 2018 K E Y R AT I O S 2019 2018

Net sales, SEK M 431,980 390,834 Net financial position excl. provisions for
Adjusted operating income¹, SEK M 47,910 40,660 post-employment benefits and lease
­liabilities, Industrial Operations, SEK bn 62.6 43.9
Adjusted operating margin, % 11.1 10.4
Return on shareholders’ equity, % 27.0 21.3
Operating income, SEK M 49,531 34,478
Total number of employees 103,985 105,175
Operating margin, % 11.5 8.8
Share of women, % 19 19
Income after financial items, SEK M 46,832 32,148
Share of women, presidents and
Income for the period, SEK M 36,495 25,363 other senior executives, % 26 25
Diluted earnings per share, SEK 17.64 12.24 Energy consumption, MWh/SEK M 5.1 5.8
Dividend per share, SEK 13.002 10.00 Total CO2 emissions, tons/SEK M
Operating cash flow, I­ ndustrial (GHG scope 1 & 2) 0.8 1.1
­Operations, SEK bn 38.3 26.6 Share of direct material purchasing
spend from suppliers having made a
CSR self-­assessment, % 92 91

Net sales, SEK bn  djusted operating

A Operating income, SEK bn Operating cash flow ­ Net financial position
income1, SEK bn O
 perating margin, % Industrial O
­ perations, excl. post-employment
A djusted operating SEK bn benefits and lease liabilities
­margin, %  Industrial Operations,
SEK bn
38.3

62.6
49.5
432

47.9

3.5

43.9
26.3
–1.2
28.4

26.6
20.2

29.3

20.8

18.3
40.7

23.3

34.5
29.7

0.3
333
302

21.1
391
313

15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19
6.5 7.0 8.8 10.4 11.1 7.5 6.9 8.9 8.8 11.5

1 For more information on adjusted operating income, please see Key Ratios on page 212.
2 P roposed by the Board of Directors. SEK 5.50 per share in ordinary dividend and SEK 7.50 per share in extra dividend.

5
 A GLOBAL GROUP 2019 CEO COMMENTS

CEO COMMENTS

A YEAR OF STRONG PROFITABILITY AND ONE

IN WHICH WE TOOK SEVERAL KEY STEPS TO
SECURE OUR FUTURE COMPETITIVENESS
2019 was a strong year for the Volvo Group. We grew our net sales by 11% to SEK 432
billion and improved the operating income to almost SEK 50 billion. This was the result of
hard work throughout the Group and I want to extend my warmest thanks to all colleagues
for their contributions. It was also a year that really put into focus the importance of both
delivering good profitability, while at the same time investing for the future and in the
technologies that are transforming our industry.

P
opulation growth, urbanization, digitalization and
a continuously expanding middle class are trends
leading to increased transport needs and we must
meet these increased needs sustainably. Effi-
ciency improvements through new technologies
will be necessary in helping us to resolve this, and
our industry is undergoing what is perhaps its greatest transforma-
tion ever. We are driving rapid technology development in such
areas as connected, electrified and autonomous vehicles. This
development is also accompanied by new business models, which
give us completely new opportunities to generate value for our cus-
tomers and for society through transport solutions that are more
efficient, safer and more sustainable. To meet the climate challenge,
new and stricter legislation on carbon emissions from our products
is also introduced. This contributes to driving the shift toward a
more sustainable transport industry.
On this transformation journey, it is crucial to have good profita-
bility and a strong financial position so that we can invest in our work together to use the flexibility in our production system as far as
future competitiveness and, at the same time, provide a good return possible to manage the fluctuations in demand. Unfortunately, the
for our shareholders. We can’t focus solely on either today’s or lower order intake meant that we had to reduce the number of
tomorrow’s business – we must do both. We need to manage the employees in some markets.
ups and downs of demand, while changing our offering over time – In total, net sales in our truck operations increased by 11% to SEK
all the time with a focus on our customers’ efficiency and profit­ability. 277 billion and the adjusted operating margin to 11.4%. Price reali-
zation, a positive mix and a good development in the service busi-
A year of record profits ness contributed to this improvement.
During the year, all major truck markets continued to grow. After For Construction Equipment the market grew in total terms in
several good years of high activity among many of our truck custom- 2019, but apart from the Chinese market, we also saw a gradual
ers, it is apparent, however, that they are now making purchases to slowdown in this area during the year. However, there is an under­
maintain their fleets rather than to expand their operations. This was lying demand which comes from the fact that infrastructure in many
reflected in reduced order intake, which led to us adapting our pro- parts of the world needs to be renewed and – wherever there is
duction and our activities to the lower level of demand, initially in population growth – expanded. Construction Equipment had yet
Europe after the summer, and we also started reductions in North another good year. Net sales rose by 5% to SEK 89 billion and the
America toward the end of the year. I am grateful for the open dia- adjusted operating margin amounted to 13.4%.
logue that we have with the trade unions and that we are able to

6
 A GLOBAL GROUP 2019
Volvo Buses continues to invest in electrification and launched
several new products during the year, including a fully electric artic-
ulated bus for city operation and hybrid buses that can be driven on
electricity over longer distances. Our bus organization also contin-
ued its internal improvement work with a reorganization in line with
the Group’s approach of decentralization and decision-making as
close to customers as possible. Increased deliveries contributed to
Volvo Buses’ net sales rising by 20% to SEK 31 billion and to the
adjusted operating margin improving to 4.3%.
Volvo Penta stands strong in its industry and has a long tradition
of innovation. During the year, new concepts were presented on the
marine side, comprising, for example, electric drivelines for ferries,
and on the industrial engine side, a driveline for an electrical terminal
tractor. Net sales were on par with the preceding year, but the oper-
ating margin declined to 14.1% as a consequence of, among other
factors, increased investments in product development.
Our important customer financing operation in Volvo Financial
Services continued to perform well, with low credit losses and a
return on equity of 15.0%. The financing volume increased and at
the end of the year, the credit portfolio amounted to SEK 170 billion.
To summarize, with a reported operating income of almost SEK
50 billion and operating cash flow of SEK 38 billion, the Group is in
a position of strength. At the end of the year, our Industrial Opera-
tions had a net cash position of SEK 63 billion, excluding pension
and lease liabilities. Our increased profitability and strong financial
position allow us to invest in our future as well as return cash to our
shareholders. The Board of Directors proposes an increase in the
ordinary dividend to SEK 5.50 per share and an extra dividend of
SEK 7.50 per share.
Striving to take the lead in the transition
In parallel with adapting our activity level to the market situation,
during the year we intensified our work to adapt the company for the
future. Our mission is to drive prosperity through transport solu-
tions. Looking ahead, this means that we should offer leading,
fossil-­free alternatives in our core segments. We are also convinced
that, by offering total solutions aimed at a larger portion of the
transport chain, we will be able to contribute to considerably higher
productivity in our customers’ logistics systems. And in this transi-
tion, which is enabled through connectivity, electrification, automa-
tion and digitalization, we will also be able to increase safety on our
roads and for our customers’ drivers and operators.
In terms of sustainability and corporate responsibility, we are
now increasing the pace in our work in line with the principles of the
UN Global Compact. In addition, the global Sustainable Develop-
ment Goals adopted by all UN member states, clearly point out the
direction ahead. The Volvo Group can make a major difference by
working on improvements throughout our own value chain. But it is
by constantly improving our offering with more efficient, more sus-
tainable and safe products and services that we can provide the
really large gains for our customers and society at large.
More collaboration
To be able to offer our customers the best solutions in this changing
landscape, it will be decisive to work together with partners. We
CEO COMMENTS
have therefore initiated collaboration with Samsung SDI on batter-
ies and battery technology, and with NVIDIA on systems for auton-
omous transport solutions.
During the year, we achieved a milestone in the form of more than
one million connected vehicles and machines in operation at our
customers. This gives us great opportunities to work with preven-
tive maintenance and to help our customers optimize the use of
their assets. The year also saw the start of commercial sales of fully
electric distribution trucks from Volvo Trucks and Renault Trucks. All
of our business areas have electric drivelines in their offerings or are
in the process of adding them. Although the volumes will be small
initially, it is a great feeling that we are driving the development of
electrified transports together with our customers. It is now impor-
tant that various societal stakeholders support this development,
for example, by an expansion of the charging infrastructure. In this
transformation, we take a broad-based approach to explore new
technologies to power our products, such as batteries and fuel cells
as well as various alternative fuels.
In pace with technology development, a gradual shift is also tak-
ing place from the customer buying a product to us providing a com-
plete transport solution or a transport service in which we also man-
age the operation. With the creation of the new Volvo Autonomous
Solutions business area, we are taking the next step in this develop-
ment. Autonomous transport solutions are built on technology that
is enabled by connected and self-driving vehicles and machines.
The solutions create value for our customers by contributing to
improved flexibility, delivery precision and productivity. They will
first be introduced in restricted areas such as mine operations,
ports and terminals, and they are also well-suited to the transporta-
tion of large volumes of goods in repetitive flows on predefined
routes.
We work continuously to develop the Group’s structure and to
seek collaboration where needed. A part of this is our intent to form
a strategic alliance with Isuzu Motors. We complement one another
very well, both in market presence and in our different strengths in
terms of products and services. Together, we will establish a part-
nership in both well-known and new technologies. We also intend
to create a stronger truck business overall for UD Trucks and Isuzu
by transferring ownership of UD Trucks to Isuzu Motors.
In many respects, these are exciting times for our industry. New
technologies and new business models will enable us to create even
more value for our customers and for society at large. We will con-
tinue to work hard to improve our performance through the business
cycle and at the same time strive to take the leadership in these new
technologies that are transforming our industry. Our focus on con-
tinuous improvement, maintaining a good profitability and a strong
financial position make us well positioned to take advantage of the
opportunities in this transformation.
Martin Lundstedt
President and CEO
7
 G L O B A L T R E N D S

CONTRIBUTING TO
A BETTER WORLD
The world is changing. In many aspects the world is becoming a better place.
Opportunities arise from global decrease in poverty, increase in life expectancy and
declining cost for renewable energy. But there are also challenges and the need of
driving development – and to grow within the planetary boundaries – is greater than
ever. As a global transport solution company we need to understand the world
around us in order to stay ahead and to stay competitive.

Overshoot
Level of
environmental
impact

Ecological ceiling

Regenerative and distributive economy

Social foundation
Shortfall

Level of
GLOBAL PERSPECTIVE societal
resources

The simplified version of Kate Raworth’s Doughnut Economics SOCIET Y AND

model is a way of visualizing how we can achieve human develop- RESOURCES
ment without damaging the earth system. For us, in the Volvo
Group, it reflects our vision of driving prosperity. It means to con-
sider the impact on environment and the usage of our society’s
limited resources in our activities.
There are two boundaries: the inner social boundary and the
outer environmental boundary envisaged by the social foundation
and the ecological ceiling. Between these two there is an area rep-
resenting an environmentally safe and socially just space for peo-
ple to prosper in. In this area, inclusive and sustainable economic
development takes place.
If there is a shortfall of society’s resources it means that p
­ eople
do not have enough food, water, health care, energy, etc. This will
The safe and
negatively impact human rights. If there is an overshoot in the just space for
usage of natural resources it will cause climate change or humanity
­biodiversity loss.
These boundaries have increasingly gained attention also for
the private sector in recent years in an effort to manage this bal-
ance in concrete and pragmatic ways. On the one hand, the UN
Guiding Principles for Business and Human Rights is focusing on
the social foundation, and on the other hand initiatives such as the
Paris Climate Agreement set the direction to avoid an overshoot.
Through the conclusions of this model together with the Volvo
Group's PESTEL scenario analysis (Political, Economic, Social,
Technological, Environmental and Legal) a number of key trends
for our industry have been identified. These are described on the
next page.

8
 A GLOBAL GROUP 2019 GLOBAL TRENDS
INDUSTRY PERSPECTIVE
Increased insights and awareness of the impacts of greenhouse gases and
other emissions drive changes in climate and energy policies. This speeds
up the progress of new mobility solutions powered by low carbon energy
and fuels. The development across markets, regions and cities varies in
speed and direction, depending on the availability of natural resources and
fuels, infrastructure, political will and incentives. Other consequences of
this development include extreme weather events or resource constraints,
which could in turn lead to higher operating costs.
The industry develops transport solutions and production systems
that better manage resource scarcity and with less emissions to air and
water. In addition to more energy and carbon efficient solutions, the
Volvo Group works to better utilize transports, recycle, remanufacture,
and refurbish products and components.
Environmental threats
and resource scarcity
Urbanization
POLITICAL
ECONOMIC
SOCIAL Geopolitical
uncertainty
TECHNOLOGICAL
EN V IRONMEN TAL
LEGAL
Safety and security
Digitization and techno­
logical transformation
We live in a hyper connected world with multiple technologies, the
internet of things (IoT) and the cloud. In 1995 about 1% of the world’s
population had an internet connection – today over half the p ­ opulation
is connected and the number of IoT connected devices will continue to
increase at a high pace during the next few years.
Digitization sparks transformation across industries and it impacts all
aspects within our industry – from how we create customer value to how
we develop, ­ produce, work and interact. The Volvo Group has over
1,000,000 connected running vehicles and machines. Based on data
insights we are providing new services for our customers as part of our
total offer. We see potential for increased customer value connected to
digitization. At the same time, we must secure data integrity to avoid dis-
ruption in manufacturing and in our value chain and comply with evolving
data protection legislation.
The United Nations Population Fund expects that there will be
over nine billion people in 2050. Half of the world’s population
already lives in cities. In the next decade, we will see a much
greater shift from rural to urban areas in Asia and Africa in
­particular. As urban populations grow, so do mobility demands.
­Cities face increasing social as well as environmental challenges,
including congestion, pollution, noise, and traffic ­accidents.
The transport and infrastructure industry must continue to
provide safer, cleaner, and more efficient solutions for all types
of urban development, whether small, medium sized cities or
mega cities.
Transport and infrastructure solutions are demanded
in diverse markets across the globe. When the world is
becoming more fragmented and geopolitically unsta-
ble it is manifested by divergent trade rules, transport
­regulations, customer requirements and competitive
dynamics, both between markets and within markets.
Our industry is striving to meet shifting economic,
protectionist and regulatory conditions and to improve
sustainability, effectiveness, safety and security in the
value chain.
Every year there are approximately 1.35 million fatalities and 50
million people injured in traffic accidents around the world.
­
There is a need to improve traffic safety and transport efficiency.
Greater traffic safety education and better planning of road-
ways are parts of the solution together with active safety fea-
tures and technology (vehicle stability, emergency braking and
visibility support) as well as passive safety components (air-
bags and body protection in the cab). Progress is also made in
terms of automation for commercial vehicles and other machin-
ery. We expect the development to intensify, also for automa-
tion within manufacturing. The use of self-driving vehicles is
expected to allow the industry to provide greater safety, fuel
­savings, and transport efficiency.
Read more about how the Volvo
Group is working to meet the global
challenges in the Value Chain section
starting on page 38.
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 A GLOBAL GROUP 2019
BRINGING OUR
STRATEGY TO LIFE
O
ur mission is to drive prosperity through trans-
port solutions and our vision is to be the most
desired and successful transport solution pro-
vider in the world. These are bold ambitions but
considering the challenges in front of us we
need to be bold. We have great people in the
Volvo Group, great assets to leverage and a clear strategic direction.
Now we will bring all parts of our strategic pyramid into life.
MISSION
Driving prosperity through transport solutions
The Volvo Group’s mission statement expresses a broad ambition
– to drive prosperity through transport solutions. Our customers
provide modern logistics as the base for our economic welfare.
Transport supports growth, provides access for people and goods
and modern transport solutions facilitate the increasing urbanization
in a sustainable way. Transport is not an end in itself, but rather a
means allowing people to access what they need, economically and
socially.
VISION
Be the most desired and s ­ uccessful ­transport solution
provider in the world
Our vision is to be the most desired and successful transport
­provider in the world. We are in a people business. Even though we
operate in a business-to-business market, people make the deci-
sions. Trust and relations are as important as the total offer. We
have competitive products and services and it is with these and our
people that we build lasting relations with our ­customers. In the
end, by bringing together the best of everything from the offer to
the relationship, we will become the customers’ preferred choice.
ASPIRATIONS
Guiding us on our journey
Working towards our aspirations ensures that we are on the right
track.
• Have leading customer satis­faction for all brands in their
­seg­ments: The only true measure of success is ­customer
satis­faction.
10
STRATEGY
VO LV O G R O U P
M
M I SS I O N
N
VISION
AS
ASPPI R AT I O
RAT ONNSS
VA
VA LU ES
ES
CCO
ODDE
E OF CON
NDDU
UCCTT
• Be the most admired employer in our industry: By being the
most admired employer we attract and retain the best people.
• Have industry leading profitability: Through strong perfor-
mance we are able to invest in products, services and people
– and thereby own our own destiny.
VALUES
Building a ­performance culture
Our values drive decisions on all levels of the organization. Customer
success – We truly understand our customers’ business. We listen
to and talk with our customers about their needs, desires and chal-
lenges. We focus on transport solutions that make customers suc-
cessful and create value for society. Trust – We are transparent and
have respect for the individual. We trust other teams to do their best
and we respect the decisions made. Passion – We are proud of the
work and business we do. We are engaged and committed to meet
our goals. Change – We are curious about the world around us. We
are innovative and find ways to create new solutions and business.
Performance – We expect a lot from ourselves and others, and
walk the extra mile to do a great job. We see the big p ­ icture and
know when to let go of an idea, a project or a plan.
CODE OF CONDUCT
Building trust with customers and society
Our Code of Conduct outlines how we do business in the Volvo
Group; ethically and in compliance with the law. Doing business in
line with the Code of Conduct builds trust with our customers as
well as with society in general, which contributes to our commercial
­success. The Code of Conduct has been developed to be a practical
tool which shall be used by everyone within the Group, see page 40.
This is an abbreviated version. The full version is available under
About us at www.volvogroup.com
A GLOBAL GROUP 2019 STRATEGY

Our company culture is about how we

interact with each other, our customers
and society as a whole. It helps us
achieve our business objectives. It is
firmly rooted in our history and is
critical to our company’s long-term
success. It is the foundation on which
everything is built.

11
 A GLOBAL GROUP 2019 STRATEGY THE JOURNEY

THE JOURNEY CONTINUES

1999–2011 2012–2015 2016–

ACQUISITION-DRIVEN TRANSFORMATION IMPROVED ­

GROWTH TO CLOSE THE GAP PERFORMANCE
Scale, synergies and geographical Product renewal, restructuring Customer focus, simplicity, speed,
expansion. and cost e
­ fficiency. continuous improvements and
organic growth.
MAJOR ACQUISITIONS

2001
Renault Trucks and Mack Trucks

2007
Nissan Diesel (now UD Trucks)

2007
70% of Lingong (SDLG)

2007
Ingersoll Rand Road ­Development

2008
VECV (joint venture with Eicher)

D
uring 1999 to 2011 the Volvo Group’s strategy
was primarily targeted at growth, not least
through acquisitions, while at the same time
focusing the business on commercial vehicles.
On the truck side, acquisitions included
Renault Trucks, Mack Trucks and Nissan Diesel
(now UD Trucks), the joint venture with Eicher Motors in India
(VECV) and in 2015 the strategic alliance with Dongfeng Commer-
cial Vehicles (DFCV) in China. Volvo Construction Equipment (Volvo
CE) bought Samsung’s excavator business, a 70% ownership in the
Chinese wheel loader manufacturer Lingong (SDLG), Ingersoll
Rand Road Development and in 2014 the hauler business from
Terex.
The streamlining to commercial vehicles has also involved divest-
ment of non-core businesses such as Volvo Aero, Volvo Rents, real
estate and the external IT business.
During 2012 to 2015 the Volvo Group underwent a transforma-
tion program aimed at reorganizing the company to take out over-
laps, reduce structural costs and increase efficiency and profit­
ability after the period of acquisition-driven growth.
The period between 2016 and 2018 was characterized by
r­einforcement of the performance culture evidenced by a more
decentralized organization and a regionalized value-chain approach.
During 2019 important strategic steps were taken with the part-
nerships with NVIDIA on decision-making systems for autonomous
vehicles and with Samsung SDI on battery packs for trucks. We
also announced our intent to form a strategic alliance with Isuzu
Motors. Furthermore, a lot of focus was put on future challenges
and opportunities. In combination with the trends described on
page 9 we have backtracked future scenarios to understand the
necessary steps ­forward. We are also assessing scenarios to build
an understanding of what is needed to align our business operations
to the Paris Agreement. Our conclusion is that the transport indus-
try is facing a s­ ignificant transformation and to succeed, our strat-
egy is more relevant than ever.
We see the improved performance and further customer focus
developing into our current focus – Perform and Transform. We
need to drive both improved performance in our current business at
the same time as we prepare for the future to create even greater
value for our customers.

12
 A GLOBAL GROUP 2019 STRATEGY PERFORM AND TRANSFORM

Perform and Transform are not sequential events, they need to

be run in parallel. To stay relevant and profitable, driving both
current business performance and the transformation to meet
future demands is our key focus going forward.

PERFORM

AND

TRANSFORM

13
 A GLOBAL GROUP 2019 STRATEGY PERFORM

PERFORM
EXCEL ON THE BASICS
AND BUILD RESILIENCE

D
uring the last couple of years the performance of
the Volvo Group has improved substantially. Our
focus has been on a gradual and consistent earn-
ings improvement, reduced volatility in earnings
and cash flow as well as allocating capital in a
disciplined way. We have great assets in our
people, products and services as well as production sites and
well-established dealer networks. We are in a good position to sup-
port our customers. But there is more to do. To keep this position
and to be able to invest further in new technologies, our focus is on
excelling on the basics as well as building resilience.
Our current business will be the base for the Volvo Group in many
years to come. The attention is on being agile and flexible in terms of
production volumes, to use our common architecture and shared
technology (CAST) wherever it is possible and to have continuous
introductions instead of major launch projects. Our quality work is
crucial to achieve customer satisfaction and the work of regionaliz-
ing our value chain is necessary to give our people the right prereq-
uisites to serve our customers.
Building resilience is key to our long-term profitability. There are
more than 2.8 million trucks, buses and machines, produced by the
Volvo Group, operating on or off-road. Of those, 1 million are con-
nected. With this as a base we can extend our service offer and cap-
ture market share. Our focus is to increase uptime for our customers,
but a larger service business also improves our resilience across the
business cycle.

SEVEN STRATEGIC PRIORITIES

There are many paths to pursue to take on opportunities and challenges.
Our seven strategic priorities consist of areas with large benefits for
both our customers and us in the Volvo Group. They guide our decision
making and result in actions but should not be seen as detailed action
plans fixed to a specific time frame.
During 2019, the work within each area continued. Our customer
offering was strengthened with new products and our regional advan-
tages were further utilized through strong collaboration and by the
offer of tailor-made solutions to our customers. The work to drive con-
tinuous improvement in product development, production, sales and
administration together with an expanded brand responsibility sets the
right focus. By leveraging Group assets for trucks and other business
areas, we generate additional profits through synergies. By utilizing the
Group's centers of excellence in new technology we strive to reach
technology leadership.
To succeed in this work we need a strong, value-based culture that
supports engaged employees and subsequently improved business
performance.

1.
REINFORCE VOLVO
as a global premium
heavy-duty truck brand
and regain position and
­market shares of
Renault Trucks, Mack
and UD as regional
high-end brands.
2. 3. 4.
CAPTURE GROWTH CREATE THE MOST SECURE ROBUST
IN ASIA through having ­D ESIRABLE HEAVY- PROFIT­A BILITY
the joint ventures DFCV DUTY PRODUCT AND through leading R&D,
in China and VECV in SERVICE ­portfolio tai- quality, purchasing and
India as well as the lored to selected pre- manufacturing opera-
Group’s value truck mium, high-end and tions using Volvo Pro-
range in a ­separate value segments. duction System.
value chain – and lever-
aging it in other emerg-
ing markets.

14
 A GLOBAL GROUP 2019 STRATEGY PERFORM

Building resilience is
key to our long-term
profitability.

5.
HAVE BRAND SPECIFIC SALES
OPERATIONS with focus on retail
excellence and a growing ­service
business.
6. 7.
LEVERAGE GROUP ASSETS in our REVITALIZE THE VOLVO GROUP
non-truck ­Business Areas, creating CULTURE with a focus on Customer
additional profits, ­synergies and tech- ­Success, Trust, Passion, Change and
nology leadership. See page 49. Performance.

Mack
Trucks
Renault
Trucks AU TO M AT I O N
OMOBIL I
EL EC T R TY
N N EC T I V I T Y
CO
Volvo UD
Trucks CHASSI S
Trucks
IS
NSM S I ON
RA
C T RONI
S
T

LE IN C
NG E
E

S
E

Buses

Construction
Equipment

Volvo Penta

15
 A GLOBAL GROUP 2019
TRANSFORM
PROVIDE EVEN GREATER
VALUE TO OUR CUSTOMERS
T
ransformation is not a means in itself. We transform
our business to provide even greater value to our
customers and respond to future needs and require-
ments from our employees and partners. The drivers
of transformation within our industry are clear.
Today’s trucks are not used to their full capacity due
to congestion, resting time regulations, non-optimized service
intervals and low fill rates. A fully-loaded truck operating on diesel is
one of the most energy-efficient vehicles transporting goods on our
roads with current infrastructure. There is no doubt, however, that
alternative fuels and electromobility will play a more important part
going forward, as a response to increased CO2 regulations as well as
to our customers’ and their customers’ demands for more sustain­
able transport solutions. When it comes to safety aspects, it is a
fact that people die in traffic and human error is by far the main
reason. It is also a fact that people and goods spend too much time
in congestion. Our daily life pattern and non-optimized infrastruc-
ture and logistics models result both in temporary congestions and
at other times heavily unutilized road networks.
An autonomous truck in operation at the
Brønnøy limestone mine in Norway. See
16 page 27.
STRATEGY TRANSFORM
The above describes both customer and society needs in terms of
safety, sustainability and productivity. The last couple of years we
have continuously invested in new business models and new tech-
nologies to be able to offer safer, more sustainable and more pro-
ductive solutions to our customers. It has resulted in a number of
pilots (ElectricSite and Vera, see page 26–27) but also in commer-
cial offers (Volvo FL and FE Electric, Renault Trucks D Wide Z.E.
and Mack LR Electric, see page 22–23, and Brønnøy, see page 27).
The Volvo Group has great assets within automation, electro­
mobility and connectivity and we will continue to invest. When it
comes to new business models (see the illustration on the next
page) there will be different needs for different customers, seg-
ments and geographical areas.
There are huge opportunities for us and to get real traction and
impact, the focus is on accelerating the execution of new technol-
ogy and business models to move from pilots to commercialization.
This is when the real change happens.
 A GLOBAL GROUP 2019 STRATEGY TRANSFORM

SUPPORTING CUSTOMERS WITH DIFFERENT NEEDS

“Provide
“Help me “Keep my “Maximize “Maximize me with the “Optimize
maintain my vehicle the use of the use of right transport my supply
vehicle” available” my vehicle” my fleet” capacity when chain”
I need it”

1 Vehicle
parts
services
2 Vehicle
uptime
services
3 Vehicle
­productivity
­services
4 Fleet
productivity
services
5 Mobility
­services 6 Platform
­solutions

FINANCING AND INSURANCE, INCLUDING USAGE-BASED MODELS

CONNECTED PLATFORM

VEHICLES AND EQUIPMENT

There are different business models for different customers. The range goes from selling a vehicle or machine and get paid by unit, to solving the
customer’s problem and get paid by result. We will have different offerings along the entire range for different customers depending on prefer-
ences, segments and geographies.

Cities around the world are work-

ing to solve the major challenges
of urbanization: air quality, noise
and congestion. At Volvo, we
believe we can make a difference
with sustainable transport solu-
tions. We want to help cities in
their transformation towards zero
cites, with zero emissions, zero
noise, zero congestion and zero
accidents. How? With a complete
e-mobility solution, efficient elec-
tric buses and our experience of
implementation as well as future-
proof technologies.

17
 A GLOBAL GROUP 2019 STRATEGY FINANCIAL TARGETS

FIN A NCI A L TA RGE T S

STRENGTHENED PROFITABILITY
AND FINANCIAL POSITION

T
he Volvo Group has in recent years gone through a
substantial restructuring process in order to reduce
structural costs and increase efficiency and is cur-
rently in a phase where focus is on organic growth
and improved profita­ bility through continuous
improvement and innovation.
A clear and straightforward operating margin target supports the
efforts to drive performance across the Group through the business
cycle. The target also aligns with the way the Group and its business
areas are challenged and measured internally. The Board’s target is
for the Group’s operating margin to exceed 10% measured over a
business cycle.
A debt-free industrial balance sheet, excluding pension and lease
liabilities, enables the Volvo Group to better manage cyclicality in a
capital-intensive industry and to secure competitive cost of funds
for the Financial Services’ operation.

Operating margin for the  Net financial position excl. post-­ Return on equity in
Volvo Group, % employment benefits and lease liabilities Financial Services, %
Industrial Operations, SEK bn

15 80 18

60 16
10

40 14

5
20 12

0 0 10

15 16 17 18 19 15 16 17 18 19 15 16 17 18 19
7.5 6.9 8.9 8.8 11.5 0.3 –1.2 26.3 43.9 62.6 13.4 13.7 14.3 15.1 15.0

The Volvo Group’s operating margin shall
exceed 10% measured over a business cycle.
In 2019, the operating margin amounted
to 11.5%. The adjusted operating margin
amounted to 11.1% (10.4). For more informa-
tion on adjusted operating margin, please see
Key Ratios on page 212.
The Industrial Operations shall under normal
conditions have no net financial indebtedness
excluding provisions for post-employment
benefits and lease liabilities. At the end of
2019, the Industrial Operations had a net cash
position of SEK 62.6 billion.
Financial Services’ target is a return on equity
of 12–15% at an equity ratio above 8%.
In 2019, return on equity amounted to 15.0%
at an equity ratio of 8.0%.

18
A GLOBAL GROUP 2019 STRATEGY

Our strong financial

position gives us the
ability to continue to
invest in our future in
order to secure an
even more competitive
customer offering.

19
 A GLOBAL GROUP 2019 ELECTRIFICATION

E L E C T R I F I C AT I O N

Sustainable
transport
­solutions with
­electromobility
Electromobility is changing the automotive world and it will also
change how we plan our cities and infrastructure in the near
future. Imagine indoor bus stops and night-time deliveries being
made possible by silent distribution trucks.

LOWER CO2 EMISSIONS

REDUCED NOISE LEVEL

INCREASED ENERGY EFFICIENCY

20
 A GLOBAL GROUP 2019
T
he Volvo Group is taking the knowledge from building
vehicles and automotive systems, and creating new tech-
nology that will not only make our cities less noisy and
polluted, but also change the world of construction
forever.
With better air quality and less noise in the city, it is pos-
sible to plan for housing and infrastructure more freely. An electric truck
without any exhaust emissions can be used in indoor terminals and envi-
ronmental zones. Their low noise level creates opportunities for doing
more transport work at night, thus reducing the burden on the roads dur-
ing the day. There is considerable market interest in electric trucks. Many
potential customers are interested in the opportunities generated by the
new technology and how it can impact their operations.
Modular system approach
Backing the Volvo Group’s offer is an accumulated expertise in electri-
fied transport solutions. Volvo Buses has been spearheading the drive
towards electrified solutions, having sold more than 4,400 electrified
buses under the Volvo brand since 2010. The buses are based on the
Volvo Group’s modular electric architecture, which is also used as the
base for the electrification of trucks, construction equipment and other
industrial and marine applications.
This is made possible by applying CAST (Common Architecture and
Shared Technology), see page 49. Volvo Group develops complete
driveline solutions, systems and components for the business areas and
adapts them to their market and application needs.
By utilizing CAST we, as a Group, can secure higher volumes and
reduce the time to market. This means that Volvo Group companies do not
need to start from scratch. They can combine known technologies into a
new solution and work more with system integration than component
development. As a result, we are seeing new products reach the market
much sooner.
ELECTRIFICATION
Broad expertise
We are convinced that electromobility will be a cornerstone in the urban
traffic structure of the future. That is why our offer is extended to
include more than just vehicles. Customers want complete system
solutions: high-quality vehicles, relevant services and an open interface
infrastructure. In these areas, we are at the forefront in research and
development, manufacturing and project management.
“Our strength lies in the breadth of our expertise and our experience.
We are one of the world’s largest manufacturers of commercial vehi-
cles. By further developing the advanced technology from Volvo’s elec-
tric buses and adapting it to suit different types of vehicles and to meet
our customers’ needs, we have put ourselves in a strong position in the
field of electric mobility. We are now pushing ahead with our work on
electric vehicles at a fast pace,” says Lars Stenqvist, Chief Technology
Officer, Volvo Group.
Volvo Trucks starts selling electric trucks in Europe
In November, Volvo Trucks announced the start of sales of its Volvo FL
and Volvo FE electric trucks in selected markets in Europe, meeting the
increasing demand for sustainable transport solutions in city environ-
ments.
The absence of exhaust emissions and with reduced noise levels,
electric trucks offer huge potential in urban areas. The reduced noise
makes it possible to carry out deliveries and refuse collection in early
mornings, late evenings or even at night, helping to improve transport
logistics and reduce congestion during peak hours. With better air qual-
ity and less noise, electric trucks create new opportunities for city plan-
ning and road infrastructure. An electric truck can, for example, be used
in indoor loading areas and environmental zones.
The Volvo FL Electric has capacity for a GVW (gross vehicle weight)
of 16 tons, while the GVW of the Volvo FE Electric is 27 tons. The start
of serial production is planned for March 2020. 
21
 A GLOBAL GROUP 2019
ELECTRIC FUTURE
ELECTRIC COM-
PACT EXCAVATOR
AND WHEEL
LOADER
Volvo Construction Equipment’s
(Volvo CE) commitment to an elec-
tric future is clear and tangible. By
mid-2020 Volvo CE will begin to
launch a range of electric compact
excavators (EC15 to EC27) and
electric wheel loaders (L20 to
L28), stopping new diesel engine-
based development of these mod-
els. In parallel, Volvo CE will keep
working to find additional opportu-
nities for electromobility across all
product ranges and applications.
Volvo CE wants to be able to offer
its customers clean, efficient solu-
tions that deliver on performance
and productivity.
BAT TERY PACKS FOR TRUCKS
STRATEGIC
ALLIANCE WITH
SAMSUNG SDI
In 2019, Volvo Group and Samsung
SDI entered into a strategic alli-
ance to develop battery packs for
Volvo Group’s electric trucks.
Working together with Samsung
SDI, Volvo Group aims to acceler-
ate the speed of development and
strengthen the long-term capabili-
ties and assets within electromo-
bility, to the benefit of customers in
different truck segments and mar-
kets. Samsung SDI intends to pro-
vide battery cells and modules to
meet the demand for the Volvo
Group’s electric trucks. The inten-
tion is that Volvo Group will utilize
Samsung SDI’s battery pack
­technology for assembly in Volvo
Group’s manufacturing operations.
22
ELECTRIFICATION
NEW LAUNCH FROM VOLVO BUSES
VOLVO 7900 ELECTRIC ARTICULATED BUS
In October, Volvo Buses launched a new electrically-powered articulated bus that
can carry up to 150 passengers and with 80% lower energy consumption compared
to a corresponding diesel bus. With the Volvo 7900 Electric Articulated, Volvo
Buses is making it attractive to electrify even high-frequency bus routes with large
numbers of passengers.
In November, Volvo Buses received, at the time, the largest single order for electric
buses in Europe. Volvo Buses will deliver 157 electric articulated buses to Transdev,
Sweden starting in 2020. The buses will operate on a number of routes in Gothenburg.
With their introduction, emissions and noise will be significantly reduced, and the elec-
tric buses will be able to operate in sensitive areas or zones with special restrictions.
Volvo’s hybrid buses have also been
upgraded. They can now drive silently and
emission-free on electricity at higher
speeds and cover longer distances than
before. This creates new possibilities for
operators to use hybrid buses even in
zero-emission zones in city centers and
other sensitive areas. The upgrade is avail-
able for Volvo Buses’ full range of new
Euro 6 hybrid buses.
REFUSE TRUCK TO NEW YORK CIT Y
MACK LR ELECTRIC
In May, Mack Trucks unveiled its highly
anticipated Mack LR battery electric vehi-
cle. Combining the refuse industry-leading
design of the Mack LR model with a fully
electric Mack drivetrain, the demonstration
model will begin real-world testing in 2020
in the demanding operations of the New
York City Department of Sanitation.
NORTH AMERICA
Volvo VNR Electric shown
to customers
In September, Volvo Trucks North Amer-
ica, for the first time, showed the Volvo
VNR Electric truck for customers and
media. Limited commercial production
will start in 2020 – with the first deliveries
being part of the partnership known as
LIGHTS (Low Impact Green Heavy Trans-
port Solutions) between the Volvo Group,
California’s South Coast Air Quality Man-
agement District and industry leaders in
transportation and electrical charging
infrastructure.
 A GLOBAL GROUP 2019 ELECTRIFICATION

ELECTRIC TRUCKS 100% ELECTRIC

Volvo Trucks presents RENAULT TRUCKS

DELIVERS ELEC-
TRIC TRUCK TO
heavy-duty electric LYON METROPOLE

concept trucks
In June, Renault Trucks President
Bruno Blin handed the keys to a
100% electric refuse collection
vehicle to Thierry Philip, Lyon
Volvo Trucks, having started sales of electric trucks for urban transport in 2019, Metropole Vice President and
believes that electrification can become a competitive alternative also for heavier Head of environment, health and
trucks. To explore and demonstrate the possibilities, Volvo Trucks in December well-being in the city. The pre-­
announced that it has developed electric concept trucks for construction operations production D Wide Z.E, the first of
and regional distribution. the second generation of Renault
Trucks electric trucks, was made in
the manufacturer’s Blainville-Sur-
Orne plant in Normandy. For
Renault Trucks, electric mobility is
the answer to the problematic
issue of air quality and noise pollu-
tion in urban areas and one of the
answers to global CO2 emissions.
Serial production of the truck is
scheduled for March 2020, initially
in limited volumes.

ELECTRIFICATION JOURNEY

VOLVO PENTA TAKING STEPS FORWARD

During 2019, important steps were taken in the journey to offer electrified power solu-
tions to both industrial and marine segments. Volvo Penta signed an agreement to
design and deliver an electric driveline for leading fire service vehicle manufacturer
Rosenbauer, scheduled for production in 2021. The company announced the aim to pro-
vide the propulsion system for an electric ferry service to be introduced in Gothenburg,
Sweden. An electric terminal tractor proof-of-concept was also revealed.
Additionally, Volvo Penta started a feasibility study with ABB in Sweden and Chal-
mers University of Technology in Gothenburg to evaluate concepts for fast charging of
electric vessels. The target for completion is 2020. At the Cannes Yachting Festival,
Volvo Penta revealed an electric saildrive proof-of-concept onboard a Fountaine-Pajot
sailing catamaran.

23
 A GLOBAL GROUP 2019
A U T O M AT I O N
Creating real-
life benefits
NEW BUSINESS AREA FOR A
­ UTONOMOUS TRANSPORT S
­ OLUTIONS
We have created a new business area, Volvo Autonomous Solutions,
which will accelerate the development, commercialization and sales of
autonomous transport solutions.
This is expected to enable the Volvo Group to meet a growing demand
and to offer the best possible solutions to customers in such segments
as mining, ports and transport between logistics centers, as a comple-
ment to today’s products and services.
With global developments that are characterized by higher demand
for transportation, increasingly congested roads and major environmen-
tal challenges, the industry needs to provide transport solutions that are
safer, have a lower environmental impact and are more efficient.
Autonomous transport solutions, based on self-driving and connectiv-
ity technologies, are well-suited for applications where there is a need
to move large volumes of goods and material on pre-defined routes, in
repetitive flows. In such situations, autonomous transport solutions can
create value for customers by contributing to improved flexibility, deliv-
ery precision and productivity.
“We have experienced a significant increase in inquiries from cus-
tomers. With the Volvo Group’s wide range of offerings and broad expe-
rience of different applications, we have a unique opportunity to offer
24
AUTOMATION
solutions that meet their specific needs. It is a logical next step for us to
gather expertise and resources in a new business area with profit and
loss responsibility to take autonomous transport solutions to the next
level,” says Martin Lundstedt, President and CEO.
Different autonomous transport solutions
The Volvo Group has already demonstrated a number of different auto­
nomous transport solutions. In the Electric Site project, material
­handling in a quarry was automated and electrified. The result was a
safer working environment and a reduction of operator costs by 40%
and of CO2 emissions by 98%.
At the Brønnøy Kalk mine in Norway, autonomous Volvo FH trucks
will be used in commercial operation to transport limestone along a
five-kilometer stretch. Another pioneering initiative is the self-driving,
connected and electric vehicle Vera.
Volvo Autonomous Solutions is a new business area as of January 1,
2020. Its financial results will be reported as part of the Truck segment.
In December, Nils Jaeger, President Region EMEA, Volvo Financial Ser-
vices, was appointed President of the new business area.
 A GLOBAL GROUP 2019 AUTOMATION

We at the Volvo Group believe that automation will redefine the commercial
transport solutions that most of us rely on every day. Automation will create real-life
benefits for both our customers and the society in terms of productivity and safety
as well as energy and fuel efficiency.

OPTIMIZATION OF TRAFFIC FLOW

REDUCTION OF FUEL­CONSUMPTION

INCREASED SAFETY

25
 A GLOBAL GROUP 2019 AUTOMATION

DECISION-MAKING SYSTEM

Volvo Group partners with NVIDIA

In June 2019, the Volvo Group signed an agreement with NVIDIA
to jointly develop the decision-making system of autonomous
commercial vehicles and machines. Utilizing NVIDIA’s end-to-
end artificial intelligence platform for training, simulation and
in-vehicle computing, the resulting system is designed to safely
handle fully autonomous driving on public roads and highways.
The solution will be built on NVIDIA’s full software stack for
sensor processing, perception, map localization and path plan-
ning, enabling a wide range of possible autonomous driving appli-
cations, such as freight transport, refuse and recycling collection,
public transport, construction, mining, forestry and more.
The partnership with NVIDIA will focus on the development of
a flexible, scalable Autonomous Driving System, which is planned
to be used first in commercial pilots and later in commercial offer-
ings from the Volvo Group. The agreement signed between the
Volvo Group and NVIDIA is a long-term partnership spanning
­several years.
NVIDIA is a NASDAQ-listed company whose invention of the
graphics processing unit (GPU) in 1999 sparked the growth of the
PC gaming market, redefined modern computer graphics and rev-
olutionized parallel computing. More recently, GPU deep learning
ignited modern AI — the next era of computing — with the GPU
acting as the brain of computers, robots and self-driving cars that
can perceive and understand the world.

AUTONOMOUS ELECTRIC VEHICLE

Vera’s first assignment

In June, Volvo Trucks announced that autonomous electric vehi-
cles, called Vera, will form part of an integrated solution to trans-
port goods from a logistics center to a port terminal in Gothen-
burg, Sweden. The assignment is the result of a collaboration
between Volvo Trucks and ferry and logistics company DFDS.
The purpose of the collaboration is to implement Vera in a real
application, enabling a connected system and continuous flow of
goods from a DFDS logistics center to an APM Terminals port
facility. Several Vera vehicles will form part of the connected
s­ ystem and will be monitored from a control tower. The aim is
to establish a seamless flow of goods responsive to demands
for greater efficiency and flexibility.
The autonomous transport solution will be further developed in
terms of technology, operations management and infrastructure
adaptations, before it can be fully operational. Moreover, necessary
safety precautions will be taken to meet societal requirements.

THIS IS VERA

• Vera is an autonomous, electric transportation safer, cleaner

vehicle that can operate with
significantly less exhaust emis-
sions and low noise levels.
• T he system is controlled and
monitored via a control center
and has the potential to make
and more efficient.
•V
 era is suited for short dis-
tances, transporting goods
with high precision.
•T
 he solution is suited for
repetitive flows with a maxi-
mum speed of 40 km/h.

26
 A GLOBAL GROUP 2019 AUTOMATION

COMMERCIAL SOLUTION ELECTRIC SITE

Next steps for

AUTONOMOUS TRUCKS
AT BRØNNØY IN NORWAY

Volvo Trucks’ first commercial autonomous transport solu-
tion is with Brønnøy Kalk AS in Norway. This service
offered by Volvo Trucks consists of limestone being trans-
ported by seven autonomous Volvo FH trucks on a five kilo-
meter stretch through tunnels between the mine itself and
the crusher. The autonomous vehicles are managed by the
operator of a wheel loader.
The commercial solution represents an exciting first for
Volvo Trucks – rather than purchasing trucks, Brønnøy Kalk
is buying a transport solution. When it comes to the agree-
ment, the customer pays per tons delivered.
Electric Site
In October 2019, Volvo Construction Equipment (Volvo CE)
signed a contract for the first commercial pilot of its autono-
mous battery-electric load-carrier together with customer
Harsco Environmental in Sweden – the next step towards
an industrialized solution.
In the autumn of 2018, Volvo CE and its customer
­Skanska performed a research project to create the world’s
first ‘emission-free’ quarry. Drawing on the electromobility
and automation expertise of the Volvo Group, the project,
dubbed Electric Site, aimed to electrify each transport stage
in a quarry – from excavation to primary crushing, and trans-
port to secondary crushing – although a negligible amount
of diesel power was still used. The viability of Electric Site
was tested over 10 weeks at Skanska’s Vikan Kross quarry,
in Gothenburg, Sweden. The results were even better than
expected. The tests showed a 98% reduction in C02 emis-
sions, a 70% reduction in energy cost and a 40% reduction
in operator cost.
Eight prototype HX2 autonomous, battery-electric load‑
­carriers, a cable-connected EX1 excavator prototype and
L X1, Volvo CE’s prototype electric hybrid wheel loader were
the concept machines used.

ADVANCED AUTONOMOUS DRIVING

JAPAN’S FIRST AUTO­NOMOUS

DRIVING TEST WITH HEAVY-
DUTY TRUCKS
In October 2019, UD Trucks, logistics firm Nippon Express
and Hokkaido agriculture cooperative Hokuren demon-
strated the use of advanced autonomous driving technology
in the handling of farm produce at one of Hokkaido’s leading
agriculture processing
facilities. The demonstra-
tion showed an autono-
mous vehicle (Level 4) from
UD Trucks transporting
sugar beets through the
facility, and as a first for
heavy-duty trucks in Japan,
autonomous driving on a
public road.

27
 A GLOBAL GROUP 2019 CONNECTIVIT Y

C O N N E C T I V I T Y

Increased
uptime with
connectivity
The Volvo Group has delivered more than 1 million connected customer assets, in
terms of trucks, buses and construction equipment. The large amount of data
collected is used to improve productivity by increasing vehicle and machine uptime,
reducing emissions and noise, as well as improving traffic and site safety.

INCREASED EFFICIENCY

LOWER ENVIRONMENTAL IMPACT

INCREASED SAFETY

28
 A GLOBAL GROUP 2019
T
he connected solutions bring increased vehicle
and construction equipment uptime for our cus-
tomers, better safety for drivers, operators and
other road users – and of course – less emissions
of carbon dioxide. The first million connected
assets is only the start, we are committed to remain a leader
in this field,” says Martin Lundstedt, President and CEO of the
Volvo Group.
Danish customer took delivery of number 1 million
At a handover ceremony of four excavators to the Danish cus-
tomer GSV Materieludlejning in October 2019, the critical
number of 1 million connected customer assets was exceeded.
CONNECTIVIT Y
“This is a significant moment for the Volvo Group and we
are happy to deliver machines that are not only robust and up
for the job, but also come with connected solutions to make
the customer’s everyday work easier,” said Jens Ejsing, Man-
aging Director of Volvo Construction Equipment Denmark as
he handed over the keys to Dan O. Vorsholt, CEO of GSV
Materieludlejning.
The four excavators are fitted with Volvo’s smart connectiv-
ity system CareTrack. It works by capturing thousands of
machine data points, which are monitored remotely in a Volvo
Uptime Center by dedicated experts. These experts use state-
of-the-art diagnostic software to process huge amounts of
real-time data and filter back only the most essential informa-
tion to the customer and dealer.
29
 A GLOBAL GROUP 2019 CONNECTIVIT Y

Solutions with real value for customers
As more and more people move into cities, the needs for better
infrastructure as well as transportation of both people and goods
are growing.
“The Volvo Group is a pioneer in connected vehicles and we use the
knowledge and insights we get from connectivity in strategic alliances
with customers and other partners to speed up the innovation cycle,”
says Lars Stenqvist, Chief Technology Officer at the Volvo Group.
Connectivity is one of the key technology areas for Volvo Group.
Leveraging vehicle data, our solutions enable our customers to
lower their costs and to increase their efficiency. Connectivity is
also an enabler for Automation and Electromobility – both when it
comes to technology and when it comes to services and solutions
for these applications. Our solutions will increase transport and
resource-efficiency through optimized traffic flows and a higher uti-
lization of existing infrastructure.
For example, connected Volvo buses use Zone Management to
let the vehicle itself use downloaded data to comply with local traf-
fic restrictions such as emission zones, noise zones and areas with
speed limits. Read more about how Connectivity is changing bus
operations on the next page.
For owners of construction equipment, trucks and buses uptime
is vital. Thanks to the collected data, wear on crucial parts can be
predicted, services planned and spare parts ordered in advance – all
improving uptime for the owner, thus leading to increased produc-
tivity. For example, this is what Renault Trucks offers with its new
Excellence Predict offer.
The Volvo Connect system combines all digital and connected
services for Volvo’s truck customers into one single interface, mak-
ing the everyday trucking operations run smoothly.
In construction equipment, the fleet management system Care-
Track allows customers and dealers to monitor productivity data as
described on the previous page.
Finally, for Swedish customer NCC, a weight control solution has
been developed, allowing the construction equipment operator and
the truck driver to monitor the load capacity in real time. The result
is a transport solution with higher productivity and lower enviro-
mental impact.
“Connectivity is transforming the transportation industry.
Insights from gathered data can be turned into value for our custom-
ers and society as a whole and make transportation more produc-
tive, more sustainable and safer”, says Anna Westerberg, Senior
Vice President at Volvo Group Connected Solutions.

ENHANCEMENTS TO VOLVO PENTA’S

EASY CONNECT

Boats are becoming smarter and more connected. The latest updates to Volvo
Penta’s Easy Connect application have been inspired by feedback from boaters to
improve the connected experience, wherever they are.
Volvo Penta Easy Connect provides users with data related to the engine, boat,
and routes taken – directly to their smartphone or tablet – which can be viewed
again when back on land. Since its launch in 2018, there have been several
updates; all of which have expanded the benefits to a broader audience.
With updates launched in 2019, the app offers even more. A connection to the
Cloud, enables user access to boat data across multiple devices, creating a seam-
less experience, and making it easier than ever to share trips and information with
the whole family. With the new update, Easy Connect is available in 11 languages.
Boaters now also have easy access to the Volvo Penta owner’s manuals through
Easy Connect. Another news is that owners get notifications to keep them
informed about new features and system updates. They can also share information
through the mobile dashboard that allows them to provide data quickly and accu-
rately to authorized Volvo Penta service dealers, lowering maintenance time and
improving precision.

30
 A GLOBAL GROUP 2019
CONNECTED SERVICES
Connectivity is changing bus ­operations
As the number of connected buses continues to rapidly
increase, huge potential to transform the whole industry is
being unlocked.
Volvo Buses has 12,000 connected buses subscribing to services
such as I-Coaching, Zone Management and Vehicle Monitoring.
We have come a long way in terms of being able to use data to
help our customers save fuel, improve safety, and increase uptime.
For example, we can understand how a vehicle is being driven,
how it is being used, what is consuming excessive fuel and then
we can advise the driver and operator on how to be more efficient.
We are also using connectivity for preventive maintenance,
improved safety and increasing customer uptime.
As the number of connected vehicles continues to increase,
vast amounts of data is being generated, and Volvo Buses is con-
tinuously working to use it to its full potential. The possibilities are
seemingly endless, with huge gains set to be made in terms of
safety, productivity, uptime and efficiency. Connectivity will ena-
ble buses to not only connect with each other but with other
transport modes and infrastructure, and create smoother, seam-
less public transport systems.
Bus operators will be able to better track their fleets and adapt
capacity according to demand. As predictive maintenance contin-
ues to improve, bus owners can have greater confidence in the
reliability of their fleets while minimizing replacement costs and
workshop visits.
CONNECTIVIT Y
SOME OF THE CONNECTED SERVICES
OFFERED BY VOLVO BUSES
Zone management enables operators to enforce
speed zones in certain locations, or in the case of
hybrid vehicles, enforce the use of electric drivelines
in areas sensitive to noise or emissions.
I-coaching is a system for monitoring driving behavior
and identifying areas for improvement such as exces-
sive idling, curving, harsh braking, quick acceleration
and speeding. Instant feedback is sent to drivers while
operators can access aggregate analyses of their entire
fleets.
Vehicle monitoring is a service that assists customers
to keep their vehicles on the road and support their
operations. Information transmitted from the bus is
analyzed and provide a decision on the actions to be
performed.
Fleet management – a real-time data-based service
that provides detailed information on entire fleets
including fuel consumption, emissions and positioning.
31
 O U R R O L E I N S O C I E T Y

PERFORM AND
TRANSFORM FOR
SUSTAINABILITY
Sustainability is embedded in everything we do. The Volvo Group has
identified a number of areas of importance for us to run our business in
a sustainable way for our customers, employees, shareholders and all
other stakeholders, who have invested in us for the long run.

CO2 CLIMATE
In 2015, all United Nations’ member states adopted one common
agenda for 2030. These are called the Sustainable Development Goals
(SDGs). There are 17 goals and 169 targets calling for action now to build
a common future. We are committed to be part of this work, which
means we must perform for our customers today and transform to
keep delivering value tomorrow.
There are three main perspectives cutting through the SDGs where
we can make a significant impact: climate, resources and ­people.
RESOURCES

1 Greenhouse gases are emitted when our products are used and
from the energy usage in our manufacturing processes.

2 Natural resources are needed to make and

drive these products.

3  Respect, safety and motivation are key. It is the people in our

operations, in our supply chain and at our customers, who make
everything come together.
PEOPLE

Integrated sustainability report

Environmental, social and financial sustainability aspects, as well requirements are included as an integral part of our financial and
as ethical business conduct, are integrated in the Volvo Group’s operational statements. In addition to this integrated Annual and
overall strategy and business model. Therefore, we have chosen Sustainability Report, the Volvo Group will provide a separate GRI
an integrated reporting approach where non-financial reporting Report on volvogroup.com.

32
 A GLOBAL GROUP 2019
The perspectives of people, climate and resources are addressed
throughout this Annual and Sustainability Report. When we prioritize
our efforts, we focus on where we can make the most impact with
our business as the main driver to shape the world we want to live in.
The United Nations Sustainable Development Goals (SDGs)
outlines the world’s common agenda for 2030
We are committed to all 17 goals, as they all have some connection
to our business. Several topics, such as gender equality and fighting
corruption are universal for all enterprises. Beyond these universal
responsibilities, we focus on the goals where our business activities
can have the biggest impact.
THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS
OUR ROLE IN SOCIET Y
Within the frame of the UN Global Compact we have worked in col-
laboration with a range of associations over the years to drive
change. Collaboration is key to gain knowledge, build capacity and
broadened understanding for the implementation of sustainable
business. Launched in 2015, the SDGs provide a clear direction.
Initiatives such as the SDGs contribute to know­ledge creation,
advancing regulation and technological development, which ulti-
mately lead to changed market demands. One such example is the
new EU emissions regulation for heavy-duty vehicles, which came
in effect in 2019, please refer to page 52–53.
Over the next pages we will look closer at how we are developing
our business and operations to make an impact.
See Quality edu­c ation on page 37.
See Health, safety and ­wellbeing
on page 34.
See Industry, ­innovation and
infrastructure on page 36.
See Climate action on page 35.
See Sustainable management of
natural resources on page 36.
See Safe and ­Secure work
­enviroment on page 34.
See Clean, safe and afford­able
transportation on page 37.
The Volvo Group has been participating in and endorsing the United
Nations Global Compact since 2001 and we have reported our pro-
gress on environmental, human right, labor standards and anti-corrup-
tion since then.
In addition, we base our work on international conventions and
standards such as the OECD Guidelines for Multinational Enterprises,
the International Bill of Human Rights and the International Labour
Organisation’s (ILO) Fundamental Principles and Rights at Work.
33
 A GLOBAL GROUP 2019 OUR ROLE IN SOCIET Y

HEALTH, SAFETY AND WELLBEING

Our work on health, safety and wellbeing is directly

impacting Goal 3, and especially target 3.6 – Halving the
number of global deaths and injuries from road traffic acci-
dents. With just one year left to meet this 2020 target, it is
evident that this milestone objective on global fatalities due
to road accidents will not be met. This will put additional
pressure to progress on this target for 2030.
Volvo Group supports this work with products, training
and complete transport solutions. 2019 marked the 50th
anniversary from when Volvo Trucks’ Accident Research
Team (ART) began to systematically gather, analyze and act
upon in- depth information about real-life traffic accidents.
The knowledge gained provides unique value in the devel-
opment of safety systems and future vehicle designs, with
the objective of making trucks and transport safer.
The safety work includes all road users, both inside and
outside our vehicles. The ART’s work focuses on improving
both active and passive safety for Volvo Group’s trucks.
Research into passive safety is designed to minimize the
consequences of any accident, and active safety means
avoiding accidents. Read more about safety in Product
development on page 51.

SAFE AND SECURE

WORK ENVIRONMENTS

Safety and health at work begins in our own

operations with direct impact on Goal 8, and
especially target 8.8 – to promote safe and secure
work environments. The vision is zero accidents.

150 ideas to improve safety

During three weeks in October 2019, the Volvo Service
Market Logistics organization in Asia Pacific set up a
Gemba Safety Race. The mission was to identify safety
gray zones through Gemba walks, find solutions to solve
the problems and implement the ideas. Around 100 em­
ploy­ees came up with over 150 ideas to improve safety.
The Gemba is central to the production system – it is the Health & Safety 1
actual place where the value is created. One of the Lost Time Accident Rate2
strengths of using the production system in this way is 1 The scope of employees
that all observations are reviewed and escalated, and included in the numbers have
increased substan­tially over
actions are deployed when needed. Many of the ideas
the past five years and since
were implemented immediately. 2018 it covers 100%.
Read more about health and safety on page 66.
2 Number of recordable
­accidents with lost time
× 200,000 hours/total
­number of worked hours
13 14 15 16 17 18 19 for all employees and con-
1.97 1.59 1.38 1.06 1.00 1.22 1.22 sultants.

34
 A GLOBAL GROUP 2019 OUR ROLE IN SOCIET Y

CLIMATE ACTION

Climate impact cuts through most of the SDGs, from

energy and resource efficiency, to sustainable transport
systems and reducing ocean ­acidification by avoiding
greenhouse gas emissions. Target 13.3 sums it up con-
cretely – Increasing awareness and capacity on climate
change mitigation, adaptation and impact reduction.

Our work is focused on fuel and energy efficiency, as

well as alternative fuels, and can be found throughout
this report:
•E lectrification, page 20–23
•F uel efficiency with I-Save for Trucks, page 45
• Alternative fuels and drivelines, page 49
•L owering energy usage, emissions and other environ-
mental impact from operations, pages 57–58

The Volvo Group’s main commitments and targets for climate and
energy efficiency through the WWF Climate Savers program:

Production Transports Products

Target: Implement energy saving activi- Target: Reduce CO2 emissions Target: Reduce total lifetime CO2 emis-
ties resulting in an annual saving of 150 per produced unit from freight sions from products, by a cumulative
GWh/year by 2020. transport by 20%. saving of at least 40 million tons.

*
* *

15 16 17 18 19 20 13 // 16 17 18 19 20 15 16 17 18 19 20
45 85 115 130 170 150* 100 90 91 85 82 80* 3 9 5 8 9 – Annual saving
3 12 17 25 34 40* Accumulated

Attained: Activities saving 170 GWh Attained: Emissions per produced unit Attained: 34 million tons of CO2 emissions
had been implemented by 2019. were 18% lower 2019 compared to have been saved 2015 to 2019.
*Target baseline 2013. * Target * Target

We also magnify our commitment by acting as advocates and drivers of climate

positive solutions in our industry and throughout the value chain. From co-chairing
the UN Advisory Group on Sustainable Transports, to increase renewabling energy in
production, enabling electrified city transports and construction, and reducing fuel
consumption in specific product ranges. Read more on volvogroup.com/climate

Climate Savers is WWF’s leadership program with the objective to recognize corpo-
rate leadership on climate solutions: develop low, zero or carbon positive business
models and demonstrate that reductions in greenhouse gas emissions can go hand-
in-hand with economic growth. Volvo Group has been part of the program since 2010,
and was the first automotive company to join. Read more on www.climatesavers.org

35
 A GLOBAL GROUP 2019 OUR ROLE IN SOCIET Y

INDUSTRY, INNOVATION AND INFRASTRUCTURE

Our industry is driven by innovation and infrastructure Other examples

development and target 9.4 – Upgrading infrastructure and • Autonomous transport solutions, page 24–25
retrofit industries to make them sustainable, with increased • Investments in innovative technologies: automation, electrifi-
resource-use efficiency and focusing on cutting CO2 per value cation and connectivity for infrastructure and transport, pages
added, is especially relevant for the Volvo Group. 49–51

Cutting emissions from the quarry

We are at a very early stage of commercializing our Electric Site
concept for quarries. In Sweden, Volvo CE signed a contract for
the first commercial pilot of its autonomous battery-electric
load-carrier, read more on page 27.
In addition, we have also invested in a customer demo
area for electric and autonomous construction machines
in Eskilstuna, ­Sweden.

Recover heat from industrial operations

Volvo Construction Equipment also invested in its own
operations to recover heat energy from the workshop in
Eskilstuna, read more about this and more about
resource efficiency on page 63.

SUSTAINABLE MANAGEMENT OF NATURAL RESOURCES

Management and efficient use of natural resources are

included in UN Goals 7 and 12, where fuel efficiency is an impor-
tant factor of target 7.3 – Doubling the rate of energy efficiency.

Volvo Penta has made an extended commitment with the WWF

­Climate Savers to increase fuel efficiency within existing engine
ranges. The Stage V engine for off-road applications can improve fuel
efficiency by up to 5%.
Target 12.2 highlights sustainable management and efficient use of
natural resources. The Volvo Group seeks to increase resource effi-
ciency and circularity through more remanufacturing, higher material
efficiency over the life-cycle and overall better utilization of the vehi-
cles during the customers’ use phase. Read more on page 62–63.

The Clean Seas campaign

Volvo Penta focuses on drivelines on land and at sea. Beyond prod-
uct focus, in 2019 Volvo Penta collaborated with customers within
the Clean Seas campaign initiated by UN Environment. The initiative
gathers companies in the marine industry to collectively address
challenges of marine environments, read more on volvopenta.com.

36
 A GLOBAL GROUP 2019 OUR ROLE IN SOCIET Y

QUALITY EDUCATION

Education and development empowers us to drive prosper- Another example is the vocational training schools we support
ity and our impact is especially strong for target 4.3 – Equal for training skilled mechanics. In Zambia we inaugurated phase
access to affordable technical vocational and higher education. two of the Nortec school in Zambia’s copper belt, read more on
page 46.
Access to competency development
We work across the value chain to build capacity for the future.
The Volvo Group stimulates individual development and training
for our employees. Please read more on page 65–66.

Vocational training stimulates employment and creates

significant value for our customers. We support vocational
training programs in different ways depending on local needs
and prerequisites. In Europe and North America, this is usually in
the form of supporting technical high schools. In some emerging
markets prerequisites are different. The Volvo Group works with
national and international aid agencies to develop local schools.
We support in project management, training of trainers, and
in-kind giving of vehicles or components to learn and work with.
One example is the Iron Women – a commercial driving acad-
emy especially targeting women – with the aim of enhancing the
capacity of professional drivers and improving road safety. In
October 2019, the South African Iron Women academy cele-
brated a class of 40 women who were previously unemployed
and are now trained professional drivers.

CLEAN, SAFE AND AFFORDABLE TRANSPORTATION

The goal of sustainable cities and communities is a signifi- Other examples

cant business driver for the industry and especially target 11.2 –
Providing access to safe, affordable, accessible and sustainable
transport systems by 2030, notably by expanding public trans-
port. In this work, the Volvo Group contributes by developing
and expanding safe and sustainable transport solutions.
• Electrification of transportation systems, pages 20–23
• Zone management for buses, page 31
• More examples from Volvo Buses, page 91–92

Euro VI in emerging markets

Mexico City invests in more sustainable public transport. In 2019,
we received an order for 129 Euro VI buses. Euro VI is the latest
European emissions standard with significantly lower emissions
of nitrogen oxides and particulate matter.

Electrified transportation is one of the solutions

In November 2019, we announced Europe’s biggest deal to date
on fully electric articulated buses. 157 buses will operate in the
public transportation system in Gothenburg, Sweden.
During the year, Volvo Group and Samsung SDI together com-
municated a joint effort to develop battery packs specifically for
the Group’s truck applications.

37
 VA L U E C H A I N

DRIVING
PERFORMANCE
TO CREATE VALUE
The Volvo Group is generating long-term competitiveness by maximizing
value creation in every part of our value chain through increased efficiency,
quality and performance and by acting responsibly towards business
partners, employees and the world around us.

CUSTOMERS
The customer is at the center of everything
we do and the customer’s voice is present in
every part of the value chain. By delivering
customer value we deliver value for ourselves
and our ­stakeholders.

REUSE PRODUCT DEVELOPMENT

Working with lean methodologies Fulfilling our customers’ needs
­enable us to reduce materials and and ­improving their profitability
energy use, incorporate more and environmental performance
­recycled materials, recover heat forms the basis of our product
and recycle waste. and service ­development.

RETAIL AND S ­ ERVICE PURCHASING

Our global network of dealers Long-term cooperation with
and service centers staffed by suppliers drives efficiency,
­competent and service-­oriented quality and responsible behavior
personnel are key factors for throughout the value chain.
­customer satisfaction and success.

PRODUCTION AND ­L OGISTICS TO THE VOLVO GROUP

Our well-invested global industrial and
­logistics setup efficiently uses continuous
improvement to meet internal targets and
deliver on customer expectations.
A significant portion of gener-
ated capital is normally trans-
ferred back into the operation.
The capital is used for invest-
ments that will strengthen
competitiveness and create
long-term value for the Group
and its stakeholders.

38

VALUE CREATION
TO CUSTOMERS
UPTIME AND
PROFITABILITY
Almost 2.1 million trucks and
100,000 buses, which the
Group manufactured in the
past 10 years, drive on roads
TO SOCIETY
DRIVING
PROSPERITY
Our products and services
make societies function.
Our customers operate bus
lines so that people can get
to work, they transport food
and industrial goods and
they build infrastructure
such as roads and hospitals.
Road freight ­transport
directly creates 6.5 million
TO CREDITORS
SEK
1.1
BILLION
A long-term competitive
business requires access to
capital to be able to invest.
A GLOBAL GROUP 2019
­ orldwide. Our construction
w TO EMPLOYEES
machines operate at con-
struction sites all around the
world, us having delivered
about 600,000 machines in
the last 10 years. In the US
over 70% of all freight ton-
nage is moved by trucks.
In the EU roughly 50%.
jobs in the EU and nearly
9 million jobs in the US. We
also contribute to the local
economy by being a major
employer in many communi-
ties, providing both direct
and indirect employment.
In 2019 the Group paid
SEK 10,560 M (9,681) in
social costs, SEK 5,031 M
(4,335) in pension costs and
SEK 9,401 M (6,838) in
income taxes. We also pay
customs duties as well as
property and energy taxes.
The Volvo Group strives to
ensure that the capital is
used in the best possible
way and to assure debt pro-
viders with the financial
strength to secure p­ roceeds
and repayment. In 2019 the
Volvo Group paid its credi-
tors SEK 1,104 M (1,307)
in interest.
VALUE CHAIN
SEK
48.6
BILLION
The Group’s 104,000
employees are our most
important asset. Employee
commitment and a perfor-
mance culture based on cus-
TO SUPPLIERS
SEK
299.6
BILLION
A solid supplier base and
profes­sional partnerships
are essential for customer
success. The Volvo Group
places high demands in
terms of a responsible and
TO SHARE­H OLDERS
SEK
26.4
BILLION
The Volvo Group strives to
generate increased value for
its shareholders. This is
achieved through a positive
share price development and
­payout of dividends. From
2014–2019 the price for the
tomer success, trust and
passion are critical for the
Group to fulfill its mission of
driving prosperity through
transport solutions. The
Group strives to offer com-
petitive employment terms
and benefits as well as a
stimulating, safe and healthy
work environment. In 2019
we paid SEK 48,600 M
(45,983) in salaries and
remuner­­­­a­tion.
sustainable behavior on its
suppliers globally. The Volvo
Group provides both income
and employment for a large
number of companies and in
many societies around the
world. ­P urchased goods and
services is the Volvo Group’s
single largest expense and in
2019 we bought goods and
services for SEK 299,595 M
(270,269).
Volvo B share increased by
86%. Shareholders normally
receive a certain portion of
the retained earnings in the
form of a dividend, after con-
sideration has been given to
the Group’s need for capital
for continued development
according to its ­strategies.
For 2019 the Board of Direc-
tors proposes an ordinary
dividend of SEK 5.50 (5.00)
per share and an extra divi-
dend of SEK 7.50 (5.00) per
share, in total SEK 26,435 M
(20,335).
39
 A GLOBAL GROUP 2019
ETHICAL AND COMPLIANT BUSINESS
B
ehaving ethically and conducting business with integrity and
in compliance with the law is a prerequisite for being a
responsible company and building trust with our customers,
business partners and society. Trust is one of the Volvo Group’s most
important values; therefore our Code of Conduct sets the framework
for everything we do.
Code of Conduct
The Volvo Group Code of Conduct is a mandatory Group-wide pol-
icy that sets the requirements on how to conduct business – ethi-
cally and in compliance with the law. The Code of Conduct states
our minimum requirements on how we do business within the Volvo
Group everywhere we operate and it focuses on the requirements
for all employees.
The Code of Conduct is complemented by other policies that
describe in more detail how we address its minimum standards and
an e-learning is launched on an annual basis to support employees
in understanding the expectations for how we do business and how
to put the Code of Conduct to work. The Code of Conduct is availa-
ble in 15 languages. Close to 50,000 employees with access to
computer workstations completed the mandatory training before
the closing of the still running campaign. In addition, more than
2,800 managers further provided face-to-face training sessions for
employees in the production environment or without access to com-
puters. In 2020, a new e-learning will be launched and further train-
ing efforts will take place to promote the Code of Conduct, its values
and key principles. The Code of Conduct is publicly available on
­volvogroup.com.
Complying with legal regulations
Legal compliance forms the basis for everything we do in the Volvo
Group. It covers many different areas and is guided by people of
expertise and knowledge across the Group, such as our work related
to complying with emissions regulations, see pages 52–53. Other
examples from the Code of Conduct are our commitments to comply
with antitrust (competition) and anti-corruption laws in all jurisdic-
tions where we conduct business. Our Code of Conduct states that
we shall compete in a fair manner on the merits of our products and
services and not participate in or endorse any corrupt practices.
These principles of compliance are implemented through the Volvo
Group Compliance Policy and dedicated compliance programs.
Across the Group we have programs consisting of a number of
elements, including policies and guidelines, a comprehensive range
of e-learning and tailored face-to-face training, counselling and sup-
port, as well as auditing and review. The Volvo Group whistle-blower
procedures also apply to our compliance programs. The process for
anti-corruption due diligence assessments of business partners
aims to prevent bribery by third parties carrying out business on
behalf of the Volvo Group. The system includes the use of external
tools, and applies to existing and new business partners.
Responsible tax practices
Given the role of taxes as a way to fund public welfare, we regard
corporate tax compliance as a matter of responsible business behav-
40
VALUE CHAIN
ior. The Volvo Group shall comply with the tax laws and regulations
of each country where we operate. We do not engage in any aggres-
sive tax planning activities through structures in tax havens or other-
wise. Where tax laws do not give clear guidance, prudence and
transparency shall be the guiding principles. A fundamental objective
of our tax policy is to ensure compliance with these principles
throughout the Group, and at the same time ensure tax efficiency
through tax-conscious management of our operations. The average
corporate tax rate of the Volvo Group for the last five years is 24%.
Monitoring adherence
Adherence to the Code of Conduct is monitored through manage-
ment control systems and internal controls. A whistle-blower policy
encourages all employees to report suspected violations to their
managers or other management representatives. If reporting to
superiors is not feasible or possible, or is not taken seriously,
employees have the possibility of escalating suspected violations to
Corporate Audit and the opportunity to remain anonymous where
permitted by law. The Volvo Group does not tolerate retaliation
against a person for making complaints in good faith of violations or
suspected violations against the Code of Conduct.
In total, 133 reports were escalated to Corporate Audit in 2019,
which exceeds the number of reports in 2018 (102). This is due to
the availability of the Volvo Group Whistle, our online platform for
submitting whistle-blowing reports, and the reinforcement of the
Code of Conduct. All reports have been addressed and investigated.
None of the reports in 2019 were considered to have a critical
impact on the Volvo Group. There are periodic reports on the whis-
tle-blower and fraud investigation activities provided to the Audit
Committee and the AB Volvo Board of Directors. The most com-
monly reported categories were workplace management (69) and
business ethics and financial practices (42). Read more about Cor-
porate Audit on page 198.
Whistle-blower concerns escalated to Corporate Audit
Type of concers reported 2019 2018
Workplace Management 69 52% 42 41%
Business Ethics and Financial Practices 42 32% 35 34%
Corruption and Conflict of Interest 7 5% 13 13%
Other including inquiries 15 11% 12 12%
Total 133 100% 102 100%
Data privacy within Volvo Group
Data privacy is part of the Volvo Group’s Code of Conduct and a pri-
oritized area across the Group. In 2018, the General Data Protection
Regulation (GDPR) came into effect within the European Union. The
purpose of the regulation is to improve protection of individuals’
rights to personal integrity. The Group-wide Data Privacy Compli-
ance Program has been established and continued in 2019. Pro-
cesses and applications have been adapted in order to ensure data
privacy and compliance with regulatory requirements. Further, the
Group Privacy Office has been established that oversee the imple-
mentation and monitoring of the compliance program. 
A GLOBAL GROUP 2019 VALUE CHAIN

VOLVO GROUP CODE

OF CONDUCT

Our Code outlines the require-

ments for how we act and do
business in the Volvo Group. It
includes respect for people and
the environment, doing business
in fair and lawful ways, that we
act in a responsible way and
speak up when we see some-
thing that doesn’t seem right.
• We respect one another
• We earn business fairly
and lawfully
• We separate personal inter-
ests from business activities
• We safeguard company
­information and assets
• We communicate transpar-
ently and responsibly

41
 A GLOBAL GROUP 2019 VALUE CHAIN

THE HUMAN RIGHTS PERSPECTIVE

T
he Volvo Group is committed to respect human rights. This
includes not just colleagues in our operations but also people
in neighboring communities, suppliers and others potentially
impacted by the use of our products and solutions. We are continu-
ously strengthening our human rights approach for further align-
ment with relevant and credible international frameworks on busi-
ness and human rights.
Our responsibility to respect human rights
The Volvo Group is a truly global company with more than 100,000
employees and 51,000 suppliers, providing transport and infra-
structure solutions to about 190 markets. Our responsibility to
respect human rights includes supporting and recognizing the fol-
lowing international and regional human rights instruments:
• UN International Bill of Human Rights
• ILO’s eight fundamental conventions
• UN Global Compact
• UN Guiding Principles on Business and Human Rights
• OECD Guidelines for Multinational Enterprises
• Children’s Rights and Business Principles by the UN Global
Compact, UNICEF and Save the Children
We look to these instruments for support and guidance, especially
in contexts with elevated human rights related concerns, and where
regulations are sometimes insufficient or inadequately enforced.
The Volvo Group Code of Conduct, Supplier Code of Conduct and
other Group-level policies and directives reflect our commitment to
respect human rights. Through these guiding documents, we set and
communicate our expectations on mutual respect, non-discrimina-
tion, safe and healthy workplaces, freedom of association and collec-
tive bargaining, working hours and compensation and zero tolerance
to any forms of modern slavery or child labor. We consider these to be
the most relevant human rights issues for the Volvo Group currently
and continue to identify any other issues that may become relevant.
These topics are also part of the mandatory training for all employees
on the Volvo Group Code of Conduct. See page 40 for more informa-
tion about the Code of Conduct and associated training.
The Volvo Group also complies with human rights related report-
ing requirements under the EU’s non-financial reporting directive
and the UK Modern Slavery Act. During 2019, we published Mod-
ern Slavery Statements for relevant companies within the Volvo
Group.
Human rights is part of our sustainability
strategy and governance
The Volvo Group’s Human Rights governance model is based on
cross-functional governance forums and working groups, all steered
by a Human Rights Board, composed by relevant members from our
Executive Board. Our Group functions such as Corporate Responsi-
bility, Legal and Compliance and Human Resources, together with
our Group Truck divisions and business areas, identify, assess and
monitor human rights related risks within our operating environ-
ment through human rights due diligence, enterprise risk manage-
ment processes, dialogues with unions, industry collaboration and
other benchmarks. Volvo Group’s human rights due-diligence and
mitigation efforts are focused on where we believe there are the
highest risks of people getting harmed. We define this by taking into
account country/region human rights risk levels, purchase category
or sales segment risks, and potential concerns brought to our atten-
tion by our employees and external stakeholders.
Our priority ahead is to continue to strengthen and implement a
robust human rights approach.
Respect for human rights in our own operations
Our human rights reviews covers our own operations and aims to
identify actual and potential adverse human rights impacts on
employees, consultants and onsite service providers. This involves
desktop review of country and sector human rights risks, self-as-
sessments and in-person workshops with the local management
and human resources country committee, in-person discussions
with employees, onsite service providers and their employees,
union representatives and also, if relevant, potential in-person dis-
cussions with other stakeholders. It is adapted to reflect the needs
of the country being reviewed. The findings of each country-level
human rights review are communicated to relevant members of our
Executive Board. Following each human rights review, action plans
for identified improvement areas are created with clear ownership
and anchoring within the local management. We strive to align our
human rights review methodology with the UN Guiding Principles
on Business and Human Rights while also taking into account Volvo
Group’s global and local operating structures.
So far, we have performed human rights reviews in Germany and
India (2017), South Africa (2018), and in 2019 concluded the human
rights review covering our operations in Mexico. The findings and
opportunities for improvement in Mexico are related to freedom of
association, health and safety, working hours in relation to breaks and
vacation, and risk of discrimination in recruitment due to favoritism.
We also identified the need to strengthen awareness and trust in our
current grievance channels. Mitigation actions related to these find-
ings are anchored within the local management in Mexico and the
progress of implementation is reviewed regularly.
Human rights due-diligence in the supply chain
We launched an updated Supplier Code of Conduct in 2019. It out-
lines the Volvo Group’s minimum requirements and aspirations for
all our suppliers in the areas of human rights and working condi-
tions, health and safety, responsible sourcing of raw materials, Envi-
ronmental performance and business ethics.
In 2018, we identified a need for improvement actions concern-
ing some of our onsite service providers’ employment of foreign
migrant workers in Malaysia. As a result, we have reviewed and
strengthened internal procedures and contractual terms for onsite
service providers there, and are monitoring the implementation of
proposed actions of these service providers. We continued to per-
form supplier sustainability audits both at current and potential
future suppliers as part of the selection process and in 2019, these

42
 A GLOBAL GROUP 2019
Responsible
business
activities 2019
Human rights reviews in own operation
Supplier sustainability audit or training
Engagement with strategic partners
Screening of certain sales deals*
*Primarily in connection with customer financing
audits were performed in Belarus, China, India, Malaysia, Mexico,
South Africa, Thailand, United Arab Emirates and USA covering 55
suppliers. The main findings from these audits related to health and-
safety, working hours and sustainability communication towards
suppliers. We also continued capacity building and training of sup-
pliers. In 2019, suppliers in Brazil, Malaysia, Mexico, Poland and
South Africa were trained on topics covering human rights, environ-
mental performance and business ethics. The training was provided
by the organization CSR Europe in connection with our partnership
in DRIVE Sustainability. We continued developing and implement-
ing a Sustainable Minerals program, which focuses on the minerals
tin, tungsten, tantalum, gold, and cobalt. Read more about supply
chain sustainability on page 55.
Building human rights capacity of strategic business partners
In addition to our owned manufacturing operations, the Volvo Group
collaborates with private business partners to assemble trucks in cer-
tain locations in Africa and Asia. We also work with a number of bus
body builders around the world that build bus bodies on our chassis in
line with customer requirements. In 2019, we performed an on-site
review and dialogue focusing on employment conditions of workers
at our truck assembly partners in Malaysia. We identified develop-
ment areas related to employment of foreign migrant workers. Our
business partners have initiated action plans and at the same time,
we are also considering how to strengthen our contractual terms and
overall due-diligence on corporate responsibility and human rights at
truck assembly partners and bus body builders.
Human rights screenings of sales deals
We screen certain sales deals for risks related to human rights, envi-
ronmental factors, and business ethics beyond compliance. These
screenings are primarily performed in connection with involvement
of the Swedish Export Credit Agency (EKN), other export credit
agencies or certain private insurance companies for guarantees on
customer financing. Volvo Trucks, Renault Trucks, Volvo CE and
VALUE CHAIN
Volvo Buses screened approximately 170 (105) sales deals in 2019.
We identified issues related to potential adverse impacts on the
environment and local communities, poor employment conditions,
occupational health and safety and unethical business behavior in
some of these screenings. Sales deals with identified risks are typi-
cally escalated within the respective business areas or at the Group-
level for further consideration and action. We often discuss and
engage with the respective customers in order to clarify and miti-
gate identified issues.
We also perform risk assessments from compliance, legal and cor-
porate responsibility perspectives in selected governmental and
other high-risk sales deals taking into account country of use, end-
user, and intended end-use. In 2019, we initiated the strengthening
of internal procedures on sales to high risk customers in conflict
affected areas. As a consequence of stakeholder concerns in 2018
surrounding the sale and use of mining equipment in Myanmar, Volvo
CE worked together with an external human rights expert organiza-
tion to identify and assess human rights risks in relation to sales to
Myanmar. Based on this and our own continuous improvement work,
we are working on strengthening our screening of selected sales
deals and providing relevant additional trainings for our employees
and dealers. We will consider the outcomes from this work in the
larger context of our overall responsible sales program. See the Retail
and Service section on page 61 for a description of our overall
approach on responsible sales.
Grievance channels and access to remedy
Our employees and external stakeholders are to able report, to the
extent permitted by local laws, any instances of human rights viola-
tions in connection with the Volvo Group or breach of our Code of
Conduct through our internal and public grievance channels. See
page 40 for more information on our grievance channels and the
types of concerns reported in 2019. 
43
 A GLOBAL GROUP 2019 VALUE CHAIN CUSTOMERS

CUSTOMERS

OUR CUSTOMERS’ SUCCESS
IS OUR SUCCESS

Climate change, a growing urban population

and technology shifts will transform society
IN BRIEF
and our customer segments at various extent
and speed. Our challenge is to be agile to mar-
• Approximately 2.1 million trucks and 100,000 buses, which
ket trends and meet customer needs both
the Group manufactured in the past 10 years, serve on roads
today and tomorrow on a global and local
­worldwide.
scale. The transition to a lower carbon society
• Our construction machines operate at construction sites
is driving emissions regulations as well as inno-
all over the world. We have delivered about 600,000 units
vations for sustainable solutions.
of construction equipment in the last 10 years.
• The Electric Site research project resulted in a total
­reduction of: Energy cost 70%, Carbon emissions 98%

W
and operator cost 40%.
• Driver training can help to reduce fuel consumption by 10%.
e strive to be the most desired and • In the US over 70% of all freight tonnage is moved by
successful transport solution provider trucks. In the EU roughly 50%.*
• Road freight transport directly creates 6.5 million jobs in the
in the world. Therefore the customer
EU and nearly 9 million jobs in the US.*
is integrated in every part of our value
chain. Our customers contribute to *Source: ec.europa.eu, iru.org, trucking.org
prosperity by transporting people and
goods as well as providing societies with infrastructure that advance
development. We support our customers by providing offers that
increase their productivity, secure uptime and increase fuel effi-
Truck applications
ciency, which drive their bottom-line performance.
Weight

Construction
Customer focus
Heavy Transport
Throughout our value chain our customer focus is central. For prod-
uct development this means developing productive and fuel-effi- Heavy Construction
cient solutions for our customers. In production we strive to have Demanding Long Haul
the highest quality, which also requires a high standard from our
suppliers. Our distribution and service network secures availability Light Construction
Interregional Haul
and uptime for the customers. We use a circular mindset and adopt
responsible business behavior to build trust and make sure our prod-
Regional Distribution
ucts contribute to prosperity. City Distribution
We analyze the segments and applications our customers oper- Distribution Long Haul
ate in to find the best current solutions, capture future opportunities
and prepare for market changes. Our research projects, in collabo-
ration with our customers and other partners, are a vital part of Transport distance
product development when we prepare for meeting future demands.
The Volvo Group offers trucks adapted to a wide variety of
applications – from city distribution to construction work, ­
long haul and heavy transport.

44
A GLOBAL GROUP 2019 VALUE CHAIN CUSTOMERS

EFFICIENT FUEL-SAVING

The Volvo FH with I-Save is

Volvo Trucks’ solution to provide
leading fuel efficiency for haul-
age companies in the long-haul
segment. By combining the new
D13TC engine with updated
fuel-saving features, fuel costs
can be cut by up to 7% – with-
out compromising drivability.
The background is the growing
demand for transportation
across Europe, with trucks cov-
ering increasingly longer dis-
tances. At the same time, trans-
port operators are faced with
rising diesel prices putting pres-
sure on profitability. Volvo FH
with I-Save has been available in
European markets since March
2019.

45
 A GLOBAL GROUP 2019 VALUE CHAIN CUSTOMERS

VALUE CO-CREATION
Value for Value for
customer Volvo Group

To be successful the key is to create value for our customers • Productivity • Excellent products
• Asset uptime and services
by contributing to improving their bottom line profitability. By • Fuel efficiency • Closeness to customers
understanding our ­customers’ priorities and challenges, we • Efficient way of operating
are able to provide products and services that grow custom- • Increased revenue
ers’ revenues and decrease c ­ ustomers’ cost. Key areas to cre- • Decreased costs • Increased revenue
ate value for our customers are offers that increase our cus- • Decreased costs
• Profitability growth
tomers’ productivity, secure uptime and increase fuel
• Profitability growth
efficiency. By delivering ­customer value efficiently, we will
also deliver value for ourselves, our owners and society.

Create value for our customers
From interviews with customers, through our customer satisfaction
surveys and materiality analysis, we conclude that our customers
put the highest value on productivity, uptime and fuel efficiency.
• Future technologies provide great potential for increased prod­uct­
ivity for our customers. During 2019 the Volvo Group presented
a number of automated, electric and connected vehicles and con-
cepts. For instance, in 2019, both Volvo Trucks and Renault Trucks
started selling electric medium-duty trucks for city transports
and refuse operations. Read more about our work within electrifica-
tion, automation and connectivity starting on page 20.
• Uptime is crucial for our customers. To secure uptime, new
­vehicles developed within the Volvo Group are equipped with
connected devices to schedule services and prevent unplanned
stops. More than 1 million vehicles are connected, which is the
largest number of connected vehicles in our industry.
• Increased fuel efficiency and adaption to renewable fuels and
electrified vehicles and machines are central in our product
development since this has a major impact on the environ­ment
and our customers’ bottom line. For instance, we offer vehicles
with the capability to run on liquefied natural gas (LNG) or bio-
gas. In 2019, Volvo Trucks began delivering trucks with the
I-Save fuel-saving feature in Europe, that can cut fuel costs by
7%, see page 45. In North America, the next generation of turbo
compound engines were introduced, providing a further 3%
improvement in fuel-efficiency compared with the previous
generation.
Measure success
Customer satisfaction is the true measure of success. Our aspiration
is to have leading customer satisfaction for all brands in their seg-
ments. Through world-wide surveys, each brand organization within
the Volvo Group tracks customer satisfaction and brand image per-
ception. The data is an important part of understanding our custom-
ers’ needs and continuous improvement. Research and studies are
performed by leading market research companies and carried out
with decision makers among customers and non-­customers. 

FUTURE TECHNICIANS IN ZAMBIA

TRAINING CUSTOMERS’ FUTURE TECHNICIANS

Trained and skilled technicians and drivers are crucial for the Volvo Group’s customers to main-
tain safe and efficient operations. In October, we inaugurated the second phase of the Nortec
vocational school in Zambia’s copper mining region. This is one of the schools around the world
supported by the Volvo Group. In this case, the Volvo Group contributes with training of trainers,
hardware and development of curriculum for the school to run effective theoretic and practical
education. By concentrating on vocational training, the Volvo Group can stimulate economic
growth and help reduce unemployment, while remedying the scarcity of trained mechanics and
technicians.

46
 A GLOBAL GROUP 2019 VALUE CHAIN CUSTOMERS

DIFFERENT TRUCKS FOR DIFFERENT APPLICATIONS

DISTRIBUTION MINING
FRANCE INDONESIA

CONSTRUCTION LONG-HAULAGE
USA EUROPE

Cost items:
Customers have different cost structures COSTS
and therefore want different offers depending
on their location and the type of transport Fuel
work they carry out. Creating customer value Driver
by improving our customers’ profitability
­therefore means offering products developed Vehicle
for each market and application. Repair & maintenance

Administration

47
 A GLOBAL GROUP 2019 VALUE CHAIN PRODUCT DEVELOPMENT

PRODUCT DEVELOPMENT

INVESTING TODAY TO BE
SUCCESSFUL ALSO TOMORROW

Product development is influenced by custom-
ers’ needs, legislation, changes in society and
new technologies. There are strong trends such
as automation, electromobility and connectivity
that need to be balanced with investments in
development of current technologies.
FACTS
• In 2019, research and development expenses amounted to
SEK 18.5 (15.9) billion, 4.3% (4.1) of Group net sales.
• Around 95% of the environmental impact from a truck occurs
during the use phase. Therefore sustainable solutions are an
integral part of our product development.
• In 25 years the fuel consumption of a 40 ton truck has been
reduced by 19% and NOX emissions by 98%.

A
• T
he Volvo Group’s safety ambition is zero accidents involving
our vehicles and equipment.
ll the Volvo Group’s product development is
based on the future needs of our customers. We
Global Development Centers
will offer products and services that help them
support their customers with the most efficient
transport solutions. The working environment
for drivers and operators shall be pleasant and
safe and our products fuel-efficient with high productivity while fulfill-
ing all requirements on emissions, safety, data protection and more.
New technology areas such as automated driving, electric vehi-
cles and connectivity will reshape both our industry and the society
we live in. At the same time, a number of countries have introduced
regulations on CO2 emissions entailing substantial fuel-efficiency
improvements. Taken together, this means that there is a need to
increase our research and development (R&D) efforts. In 2019
investments in R&D amounted to SEK 18.5 billion and that number
is expected to increase in the next few years. During the year, the
Volvo Group hired some 1,000 new employees within R&D,
strengthening our capabilities in areas such as software develop-
ment, artificial intelligence and battery technology. Partnerships to find the best solutions
However, it is not only important to have the right resources, but We also need to work more in partnerships with other companies,
we must also balance our investments between what may be called universities and suppliers to find the best solutions for the future.
well-known technologies and the new technologies. Our engineers During the year we signed an agreement with NVIDIA to jointly
need to continue to innovate and develop the well-known technolo- develop the decision making system of autonomous commercial
gies to make engines and transmissions more fuel-efficient with vehicles and machines (please see page 26 for more information)
lower emissions, further reduce the weight of the vehicles, make and entered into a strategic alliance with Samsung SDI to develop
them more aerodynamic and to ensure that the cabs are further battery packs for Volvo Group’s electric trucks (please see page 20
adapted to the needs and demands of drivers and operators. Inno- for more information). In March, Telia, Ericsson and Volvo Construc-
vative ideas are just as important in well-known technologies as tion Equipment (Volvo CE) launched Sweden’s first 5G network for
they are in new technologies, and we firmly believe that there is still industrial use at Volvo CE’s facility in Eskilstuna. Volvo CE uses the
huge potential for improving the well-known technologies. 5G technology to test remote-controlled machines and autono-
In parallel we have increased our efforts in areas like automation, mous solutions. Furthermore, we need to work even more inte-
electromobility and connectivity. Each one of these areas has a sub- grated with our customers to ensure that the features we develop
stantial impact on the mobility of goods and people and when they are useful for them and that we can work together to develop the
converge, they have the potential to radically transform the trans- new business models needed.
port industry.

48
 A GLOBAL GROUP 2019 VALUE CHAIN PRODUCT DEVELOPMENT

Increasing fuel efficiency and alternative fuels and drivelines Progressing electromobility
In order to be able to fulfill the upcoming CO2 requirements in for There are several reasons why electric vehicles are now emerging in
instance the EU and the US, improved diesel engine trucks as well the transport industry with an ever improving business case for
as electric trucks will play an important role. customers.
There has been a continual improvement in the performance of • An electric motor is highly energy-efficient.
the diesel engine. We performed a fuel consumption and nitrogen
• Battery capacity is increasing and prices are decreasing.
oxide (NOX) emission test between two typical European long-haul
tractors, a Volvo FH from 2016 and a Volvo F12 from 1991. Both • Provided that the electricity has been produced from non-fossil
trucks were simultaneously measured on an open road during sources, electric propulsion reduces emissions of CO2.
­normal traffic situations, pulling similar semi-trailers loaded to 40 • There are no local emissions of nitrogen oxides and particulates,
tons total weight. The test route was driven four times during the and the electric motor is quiet.
same day. The measurements, from preparation to final evaluation, We believe that electrification will fundamentally change the way
were witnessed, reviewed and approved by an independent third we look at city planning. It opens up for indoor bus stops at hospi-
party. The measurements showed that the new Volvo FH has tals or shopping malls. Electric vehicles will also enable better use of
reduced fuel consumption by 19% and NO X emissions by 98% the infrastructure, especially in cities. Today, roads and streets are
compared to the Volvo F12 from 1991. mostly used during rush hours and daytime. The noise from diesel
In 2019, further fuel-efficiency steps were taken. In North Amer- vehicles makes it hard to distribute goods or do constructions work
ica, Volvo Trucks and Mack Trucks introduced the next generation at night, but with electric vehicles being quieter, the infrastructure
turbo compound technology, providing up to an additional 3% could be used at night for some purposes.
improvement in fuel efficiency over the current 13-liter turbo com-
pound engine. And in Europe, Volvo Trucks introduced Volvo FH with
Mack
I-Save, a solution that can cut fuel costs by up to 7% in long-haul Trucks
operations – without compromising drivability (please see page 45). Renault
We acknowledge that there is no single fuel that can meet all Trucks AU TO M AT I O N
OMOBIL I
needs. Conventional diesel fuel, with increasing renewable or syn- EL EC T R T Y
N EC T I V I T Y
thetic content, will likely remain the dominant fuel for most types of CO N
Volvo UD
commercial transport for years to come in most markets. Today, the Trucks CHASS I S
Trucks
IS
Volvo Group offers vehicles with the possibility to use alternative A NSM SIO NS
TR
fuels such as biodiesel, hydrotreated vegetable oils (HVO), natural C T RO NI C
LE
IN
gas and biogas. The biggest challenge for the large scale adoption NG E
E

S
E

of alternative fuels is not compatibility or emissions, but the lack of

adequate supply and infrastructure as well as clear tax rules.

Buses

COMMON ARCHITECTURE AND SHARED TECHNOLOGY

Construction
Equipment
LEVERAGING SYNERGIES
Volvo Penta

With a number of brands in different product segments, we strive
to find synergies to reduce product and product development
costs, while simultaneously securing brand-unique solutions.
Volvo Group is now leveraging more than 15 years of work to
­create a modular system, and we have come a long way. We call
the system CAST – Common Architecture and Shared Technology.
The base engines we develop are shared by our trucks, construc-
tion equipment, buses and marine and industrial engines, while
electric systems and transmissions are shared by most product
segments and chassis components by all our truck brands and
buses, to give a few examples. We continue to build on this
approach for the new technologies: automation, electromobility
and connectivity. Instead of reinventing the wheel with every new
product, we use as much common technology as possible, for
the benefit of both our customers and the Volvo Group.
The efficiency gains generated by our consistent work with
commonality are not confined to product development, they can
also be seen in our supplier structure, industrial system, sales and,
not least, service organization. At the same time, it is important to
ensure that each product in the modular system is adapted to what
customers expect from each brand and product segment, as well
as local demands and requirements. Therefore we have a global
product development system with engineering resources in differ-
ent parts of the world, close to customers, to ensure that every
product delivers the unique brand value that customers expect.

49
 A GLOBAL GROUP 2019 VALUE CHAIN
More and more cities are investing in electric public transport sys-
tems. As far back as 2010, Volvo Buses took the decision to offer
low-floor city buses only as hybrids on the European market. Volvo
Buses now offers an entire range of electrified city buses, including
hybrids, electric hybrids and all-electric buses. Volvo Buses has sold
more than 4,400 Volvo branded electrified buses worldwide since
the start in 2010. The Volvo Group benefits greatly from being early
in the development of electrified solutions for buses. The technology
is now also used for all other areas in the Group. During the year Volvo
Trucks and Renault Trucks started sales of trucks for city distribution
and refuse handling and Mack Trucks, Volvo CE and Volvo Penta pre-
sented electrified concepts with commercializing within short.
The next step is the electrification of trucks for construction and
regional-haul operations. During the year Volvo Trucks presented
such concepts trucks both in Europe and the US. The all-electric
Volvo VNR regional-haul truck will be tested in California during
2020 and the same year sales will start.
Volvo Trucks also presented electric heavy-duty concept trucks
for regional distribution and construction transport.
For long-haul operations it will take longer, not least because it will
take time to increase battery capacity, reduce charging times and
build up the charging infrastructure operators need. Combustion
engine technology will therefore be needed for many years to come in
these applications. However, the total cost of ownership for electric
trucks is coming down, making them a viable option in many appli-
cations within a few years.
The Volvo Group’s electric vehicles are powered by batteries, but
in the future there may be applications where fuel cells are a viable
VOLVO TECHNOLOGY AWARD
ELECTRIC SITE THE WINNER
The Volvo Technology Award is a mark of recognition for outstand-
ing technical advances that contribute to the enhancement of the
Volvo Group’s high-tech competitiveness and technological exper-
tise. In 2019, Volvo CE’s Electric Site won the Award. The project,
which ran for more than ten weeks in late 2018, was a partnership
between Volvo CE, Skanska Sweden, the Swedish Energy Agency
and two Swedish universities – Linköping University and Mälar­
dalen University. For more on Electric Site, please see page 27.
The winners are Marcus Broberg, David Dujmovic, Bobbie
Frank, Peter Johansson, Chongchul Kim, Marcus Kreku, Joakim
Lundin, Uwe Müller, Albin Nilsson, Markus Rombach, David
Rylander, Ted Samuelsson, Johan Sjöberg, Mikael Skantz, Erik
Uhlin, Joakim Unnebäck and Jimmie Wiklander.
50
PRODUCT DEVELOPMENT
option. In the long term, a dynamic supply of electricity from the road
could potentially also power long-haul trucks. Read more about the
Volvo Group’s progress within electromobility on page 20.
Connectivity presents new opportunities
When it comes to connectivity, or the digitization of vehicles, Volvo
Group was the first in the commercial vehicles business to offer
telematics solutions back in 1994. Today, we have a broad customer
offering of connected solutions for trucks, buses and construction
equipment. With more than 1,000,000 connected vehicles and
engines surpassed in 2019, we have the largest number of con-
nected assets in the industry.
Today’s connected solutions help our customers to lower their
costs through fleet optimization, increased load factor and thus lower
fuel consumption. Connectivity also helps raise their productivity and
profitability through improved uptime. Uptime means avoiding
unplanned stops, which we can help our customers achieve by moni-
toring vehicles and predicting when they will need maintenance,
assigning a technician and scheduling a visit to the service station at
a time when the truck is not operational. In many markets we use
remote programming services, making it possible to wirelessly
download different software updates wherever the truck is. Connec-
tivity also has the potential to increase transport and resource effi-
ciency through optimized traffic flows and higher utilization of exist-
ing infrastructure, as well as new business models for logistics.
Safety is another area that benefits from new connected solutions
where vehicles are connected to each other and to infrastructure. Read
more about the Volvo Group’s progress in connectivity on page 28.
 A GLOBAL GROUP 2019 VALUE CHAIN PRODUCT DEVELOPMENT

Automation benefits customers and society Safety is a prerequisite

We believe that automation will redefine the commercial transport
solutions that most of us rely on every day. Automation will create
real-life benefits for both our customers and society in terms of pro-
ductivity, safety and energy efficiency. However, automation is
nothing new. Automated gearboxes and cruise control, to name a
few, are functions that have been part of our commercial offer for
several years, supporting drivers in their everyday work. With the
exponential increase of microprocessor capacity, however, it is now
possible to take automation much further.
There are different levels of automation throughout the vehicle
industry – from no automation to self-driving vehicles without the
need for a driver or operator. Since the ideal level of automation is
determined by its added value for customers and society, Volvo
Group will offer new automated solutions at different levels. We
believe that there will be drivers and operators in our vehicles in
most applications for the foreseeable future, but self-driving com-
mercial vehicles in specific applications are fast becoming a reality
in confined and semi-confined areas like mines, quarries and ports.
For more complex environments, such as city traffic and mixed traf-
fic at higher speeds, we believe that it will take significantly longer
time before this is possible.
We have come a long way in terms of technology development,
but more R&D is needed. Together with authorities, we in the indus-
try need to further develop and agree on standards and regulations,
liability issues and cyber security to fully utilize all possible auto-
mated features of the future. Read more about the Volvo Group’s
progress in automation on page 24.
The Volvo Group’s safety ambition is zero accidents involving our
vehicles and equipment. Road traffic and worksite safety are global
challenges for the Volvo Group. Safety is about reducing the risk of
accidents and mitigating the impact of any incidents that do occur.
Safety is therefore an integral part of product development. The
Volvo Group’s in-house Accident Research Team has been investi-
gating accidents involving heavy-duty trucks for 50 years. Combin-
ing accident data analysis with the Group’s own research and test
programs, provides solid insights into the causes of accidents and
injuries. This is important input for developing even safer products
for our customers.
Volvo Group has pioneered a variety of driver assistance systems,
including Driver Alert Support and Lane Changing Support, which
enhance awareness and alert the driver before a situation turns criti-
cal. The Collision Warning with Emergency Brake system is another
sophisticated system, which offers market-leading emergency brak-
ing capabilities. There are also automated safety systems such as
Lane Keeping Assist and Stability Assist. The rapid development
within the automation area will make it possible for us to offer even
more sophisticated driver assistance systems in the coming years. 

PROMOTING SUSTAINABILIT Y

CONSTRUCTION CLIMATE CHALLENGE

The Construction Climate Challenge (CCC) is an initiative hosted

by Volvo CE to promote sustainability throughout the entire con-
struction industry value chain and provide funding for environmen-
tal research. CCC is a part of the Volvo CE commitment to WWF’s
Climate Savers Program (see page 35). In addition, Volvo CE is a
Corporate Advisory Board member of the World Green Building
Council.
During 2019, two research programs financed by CCC were
published, both focusing on decarbonizing infrastructure projects
– please read more on constructionclimatechallenge.com.
Volvo CE has also seen positive development on the electrifica-
tion and reduced climate impact of quarries. At the research test
site, Electric Site, CO2 emissions were cut by 98%. During 2019,
we have now moved ahead with a commercial pilot project, read
more on page 27.

51
 A GLOBAL GROUP 2019 VALUE CHAIN
EMISSIONS REGULATIONS
FOR HEAVY-DUTY VEHICLES
T
he last decades, regulators in Europe, the US and
Japan have progressively implemented stricter
emissions standards for new heavy-duty engines for
trucks and buses. China is also emerging with its
new CN VI regulation for 2020 and 2023, which is
even surpassing the EU regulation in stringency in
some areas, including demands on remote or telematics transmission
of engine and nitrogen oxide (NOX) data. In spite of great progress,
particularly related to lower levels of NOX and particulate matters
(PM), problems with air pollution and climate change remain. A com-
mon trend globally for regulators going f­orward is more focus on
actual ‘engine in vehicle’ performance in use instead of generic engine
testing in a test cell. The Volvo Group supports this direction. The
Euro VI regulation implemented 2013 has clearly shown that ­testing
with portable emission measurement systems (PEMS) can be a very
effective way to reduce real driving emissions during all ­conditions.
The emissions regulation for passenger cars has now been updated in
the same direction. We actively follow developments to ensure
adherence by developing engines that meet all legal r­ equirements.
Europe
For non-road engines in EU, the Stage V regulation was introduced
2019. The main changes compared to Stage IV relate to particulate
matters. The new requirements are set at a performance level
achieved with particulate filters.
The emissions regulation for on-road vehicles was also updated
with a Euro VI step D fully implemented in 2019. The main updates
concern the in-service conformity testing with PEMS where the
limits regarding payload and power have been changed to include
low load duty cycles in a better way. A fifth update of the Euro VI
regulation since the introduction, step E is decided and will include
cold start emissions and PM number measurements for the PEMS
on-road measurements when fully implemented 2022. The EU
Commission has also started to develop a post- Euro VI regulation.
A draft regulation is expected to be ready 2021.
As a first step in regulating carbon dioxide (CO2) emissions from
heavy-duty vehicles, a declaration of CO2 emissions and fuel con-
sumption for new heavy-duty trucks was started in the beginning of
2019. The regulation has been developed by the EU Commission
with broad support from the Volvo Group and the industry via the
European Automobile Manufacturers’ Association (ACEA). The certi-
fied CO2 declaration is the most advanced in the world and is based
on certified measurements of components and calculations of com-
plete vehicle CO2 emissions. The system gives customers a possibil-
ity to compare CO2 emissions of different product offerings and
52
PRODUCT DEVELOPMENT
specifications. This will even further strengthen and support the mar-
ket forces regarding CO2 and fuel consumption.
The second step is a CO2 reporting and monitoring regulation
starting 2020, allowing the EU Commission to annually follow the
progress of all new trucks and implement further actions if needed.
As a third step, a regulation setting CO2 emission performance
standards for new heavy-duty vehicles has been published by the
EU Commission. According to the decision, the average annual CO2
emissions of the Union’s fleet of new heavy-duty vehicles is to be
reduced by 15% year 2025 compared to the reference being the
2019 CO2 monitoring data. From 2030 onwards the reduction is to
be at least 30% compared to 2019.
The CO2 regulation will drive the introduction of a broader scope
of powertrain technologies and fuels, technologies that are not fully
covered in the current Euro VI regulation. This will require an
updated Euro VI regulation, to be aligned with the CO2 regulation.
There is also a planned review of the complete CO2 emission perfor-
mance standard 2022 which includes several aspects influencing
the effectiveness of the standard, as well as the reduction target for
2030 and new targets for 2035 and 2040.
USA
In the US, the EPA (Environmental Protection Agency) and NHTSA
(National Highway Traffic Safety Administration) have decided the
US Greenhouse Gas (GHG) regulation phase II final rule that will start
2021. It includes separate regulations for engines and vehicles, but
also a new separate trailer regulation that started already 2018. One
main difference from the current regulation is that the vehicle regula-
tion in phase II includes the actual engine performance of the vehicle
instead of a generic engine model. All limit values for engines and
vehicles have been updated. The level of stringency will according to
the EPA increase by up to 27% between year 2017 and 2027.
Regarding air pollutants, California Air Resources Board (CARB)
has adopted optional low NOX certification standards for on-road
heavy-duty engines. The emissions levels are reduced by up to
90% compared to the current federal NOX levels.
Local initiatives
On top of these regulations there are other local initiatives where cit-
ies around the world set more stringent regulations to improve air
quality in cities. One example is the commitment from Paris, Mexico
City, Madrid and Athens made at the C40 Mayors Summit to remove
diesel vehicles from their cities by 2025. C40 is a network of the
world’s megacities committed to addressing climate change. 
 A GLOBAL GROUP 2019 VALUE CHAIN PRODUCT DEVELOPMENT

EMISSIONS STANDARDS

US,
CANADA RUSSIA
EUROPE Euro IV-V
US10 Euro VI
US GHG
phase I a CHINA
CN IV-V b
JAPAN
pPNLT
FE 2015 C

SOUTH
AFRICA INDIA
Euro II BS III-IV e
BRAZIL
US 1998
Euro V AUSTRALIA
Euro V
US07 d

Particulates, g/kWh NO X g/kWh Emissions legislations vary for different regions. In some regions the
implementation of stricter rules is hindered by insufficient availability
0.16 Europe USA 8 of good fuel quality and low sulfur content. In many parts of the world
the emissions legislations are based on EU and US legislation. In 2010
0.12 6 US10 was implemented in North ­A merica and at the end of 2013
Euro VI was introduced in the EU. With the implementation of US10,
0.08 4 emissions levels for particulates (PM) and nitrogen oxides (NOX) have
decreased substantially. Euro VI entails that emissions of NOX and PM
0.04 2 partic­ulate matter are reduced by more than 95% compared to a truck
from the early 1990s.
0 0
Euro III Euro IV Euro V Euro VI US02 US07 US10 a US Greenhouse gas standard phase I.
2002 2006 2009 2014 2002 2007 2010 b The first step in CN VI will be implemented in 2020.
Particulates, g/kWh NO X, g/kWh c Japan Fuel Efficiency targets 2015.
d In addition to Euro 5 and US07, there is also NLT in Australia.
e India moves to BS VI (stage 1) in 2020.

53
 A GLOBAL GROUP 2019 VALUE CHAIN PURCHASING

PURCHASING

PERFORM AND TRANSFORM

WITH SUPPLY CHAIN PARTNERS

Together with our supply chain partners we are

facing a paradigm shift in the transport indus-
FACTS
try. Change is coming faster with shorter devel-
opment cycles than ever seen before. To remain
• In 2019, the Volvo Group made purchases of goods and
competitive in all areas in a sustainable way, we
­services ­totaling SEK 299.6 billion.
need to collaborate and co-create, and how we
• We have around 51,000 Tier 1 suppliers, of which about
do that has changed a great deal. 2019 marked
6,000 supply automotive product components.
the year when choice of strategic partnerships
• During 2019, 92% of spend from automotive p ­ roduct
were of utmost importance.
suppliers were from approved sustainability self-assessed
suppliers. In high risk countries the figure was 98%.

T
Percentage of purchases by region
he Volvo Group is aiming for purchasing excellence,
placing high demands on ourselves and our supply
chain partners. Our aspirations is to have industry-­
leading customer satisfaction for all brands in the Volvo 64%

Group. That requires high-performance ­relation­ships 21%

both within well-known technologies, such as com- 7%

bustion engine technology, as well as new technologies, such as

Automation, Connectivity and Electromobility.
7%
The Volvo Group is continuously working towards optimizing its 1%

supplier base and geographical footprint. An optimized global foot-

print will reduce lead-time for our customers and actively reduce our
CO2 footprint. We aim to secure outstanding quality and technology
at the best possible commercial offer when we purchase any prod-
uct, service or solution. We work to actively secure purchasing
­synergies. This drives efficiency and continuous improvement.
Supply chain development
In 2019, the Volvo Group bought goods and services for SEK 299.6
(270.3) billion and 2.5 billion parts were delivered to our over 40
major production plants around the world. Multiple sourcing meets
the demands for locally produced content and reduces the impact of
trade tariffs, but it also reduces supply chain risks. Reduction of
long-distance transports are increasingly relevant, as it can contrib-
ute to a significant reduced environmental impact.
The initiatives taken in 2018 to improve and secure capacity man-
agement as well as volume planning, were fully paying out in 2019.
We brought the delivery situation back to normal levels in Europe
and North America already in the first half of 2019. In the second
half of the year we started to switch focus, from delivery to cost. In
parallel, the shift from well-known to new technologies requires
more research and development activities in the supply chain.
Through active and close collaboration with our supply chain part-
ners, we build and secure a base to stay relevant also in the future.
Balancing people, planet and profit
We place high expectations on ourselves when it comes to responsi-
bility and sustainability, and we require the same from our some
51,000 supply chain partners. Keeping this supply chain wheel turn-
ing around the globe 24/7, requires strong partnerships. We there-
fore put sustainability in everything we do with requirements and
aspirations based on our Supplier Code of Conduct. During 2019,
the commitment of Volvo Group Purchasing can be characterized by
a new and strong foundation, an even stronger mindset on sustaina-
bility and increased industry collaboration.
By balancing the three aspects people, planet and profit, we have
increased the dialogue, transparency and trust with our current and
potential supply chain partners as well as other stakeholders. Sus-
tainability is now an established key criteria in our sourcing selec-
tions, alongside quality, delivery, cost, features, technology and risk.
Still, there is more to be done to increase transparency in global sup-
ply chains even further.
Our Sustainable Purchasing Program looks at specific high risks to
people and the environment and revolves around the following parts:

54
 A GLOBAL GROUP 2019 VALUE CHAIN PURCHASING

 Supplier Code of Conduct to create the right mindset. All suppli-
ers are expected to commit contractually to our new Volvo Group
­Supplier Code of Conduct, which was launched during 2019. This out-
lines our requirements as well as aspirations and encouragements
towards all suppliers and is based on acknowledged global standards
such as UN Global Compact’s principles. It is the base for creating the
right mindset and knowledge both internally and externally.
 The Supplier Sustainability Assessment Program requires a basic
evaluation of all our supply chain partners through a Sustainability Self-­
Assessment questionnaire, a tool developed by DRIVE Sustain­ability,
see highlight below, with the target to have all our suppliers evaluated
 Industry Collaboration drives broader implementation. Two of
the main networks where we collaborate for broader and more scal-
able sustainable development of global supply chains are DRIVE
Sustainability focusing on supply chain sustainability of the auto­
motive industry, and RMI, focusing on sustainable minerals sourc-
ing. Read further below on this page. 
Main elements of Sustainable Purchasing

in the areas of human rights, business ethics and environmental perfor-

mance. New supply chain partners in high-risk countries are further- Creating
Supplier Code of Conduct right
more assessed through an on-site audit with focus on working environ- mindset
ment and labor practices. Audits of existing suppliers are made of
selected suppliers in connection with the Human Rights reviews of our Industry Supplier
own operations and on an ad hoc basis if a specific need is identified. collabo- assess-
rations ment
The most common deviations from the Code of Conduct found were program
related to occupational safety, working hours and communication of
sustainability requirements towards sub-suppliers.
Innovation Supply
 Supply Chain Mapping for identified segments and areas. One people and chain
environment mapping
examples is our Sustainable Minerals Program where we, with the help
of the tools of the RMI (Responsible Minerals Inititiative), perform sup-
ply chain mapping and human rights due-diligence of our supply chains
for tin, tantalum, tungsten gold, cobalt and other materials.
 Innovation focusing on people and planet includes internal train-
ings, mindset activities and best practice sharing events. The purpose SUPPLIER SCREENINGS
is that sustainability shall drive innovation focusing on people and
planet. We are driving a mindset towards circular economy, recycling New suppliers are screened for human rights, environment
and eco-design, and as well a more value driven approach for human and business ethics. Those located in high risk areas are also
required to be audited on-site.
rights. Volvo Group Purchasing continues to take an active role and
part in the Volvo Group’s overall human rights program, which aims to
identify actual and potential human rights impacts on employees,
consultants, onsite service providers and other parts of the value
92% 55
of spend 2019 came on-site sustainability
chain. During 2019, we have followed-up on the findings of previous from sustainability audits in high
years reviews. Read more about the human rights on page 42. self-assessed suppliers. risk countries.

Collective action for sustainable materials
Responsible Minerals Initiative (RMI) is a collaborative platform
addressing responsible mineral sourcing issues in global supply
chains. Volvo Group is working with RMI with the aim to ensure
responsible and sustainable sourcing of tin, tantalum, tungsten and
gold (the so-called Conflict Minerals), as well as cobalt. Through
RMI, participants develop and get access to tools and resources to
improve regulatory compliance and support responsible sourcing
of minerals from conflict-affected and high-risk areas. Volvo Group
has implemented the tools and guidelines developed by the RMI,
such as reporting templates, with the aim to create supply chain
transparency and RMI compliance of our suppliers in the affected
supply chains. The next step is to establish a baseline that will
allow us to build our Sustainable Materials roadmap. Compliance
to our Sustainable Minerals program means that:
• The suppliers of our suppliers are on the RMI approved list and,
• Suppliers have their own due diligence program according to
RMI standard.
DRIVE Sustainability - Broad adoption of sustainable
procurement via CSR Europe
DRIVE Sustainability seeks to build a common compliance plat-
form and sustainable procurement within the automotive sector.
Volvo is active in several working groups within the initiative to
develop assessment questionnaires for suppliers (SAQ) and
broaden awareness of sustainability topics in the industry and
­supply chain. The SAQ for suppliers has now been translated and
made available in 13 different languages. In 2019, 92% of the total
spend was sourced from sustainability self-assessed suppliers.

55
 A GLOBAL GROUP 2019 VALUE CHAIN
PRODUCTION & LOGISTICS
WELL-POSITIONED TO MEET
CURRENT AND FUTURE DEMANDS
Digitization and automation are major trends
influencing how we set up our manufacturing
for the future. We are working to understand
the ­challenges and prepare our facilities and
employees for the changes and investing in
modern production equipment.
T
o secure robust profitability and meet future demands,
the Volvo Group has developed a mindset of continu-
ous improvement as well as tools, processes and pro-
duction systems that contribute to cost efficiency. We
strive to meet customer expectations by focusing on
quality, flexibility, lead times, delivery precision and
availability of parts, while simultaneously ­working to ensure health,
safety and well-being for our employees.
2019 was a year with high capacity utilization in our industrial sys-
tem. The demand was strong for the Group’s products in many mar-
kets. The material supply challenges characterizing the first quarter of
2019 were during the second half of the year managed and solved in
collaboration within the Group and with supply chain partners.
Factories and assembly plants to meet demand
Our industrial system consists of capital-intensive component facto-
ries as well as labor intensive assembly plants. The component fac-
tories supply the Group’s needs on a global basis, whereas assembly
plants, in most cases, are located close to end-markets to cater for
local needs and specifications and shorter delivery time. Our indus-
trial and logistics system is generally well invested with modern pro-
duction equipment and adequate technical capacity.
All wholly-owned production facilities and distribution centers
are third-party audited. We hold certificates as follows:
• ISO 9001 Quality management system: Approximately 95%
of production f­ acilities and 90% of distribution centers.
• ISO 14001 Environmental management system: Approximately
95% of ­production facilities and 90% of distribution centers.
• ISO 50001 Energy management system: Lehigh Valley,
­Hagerstown and New River Valley plants in the US and the
Rugby distribution center in the UK.
• OHSAS 18001 or ISO 45001 Occupational health and safety
­management ­system: Approximately 30% of employees.
56
PRODUCTION & LOGISTICS
FACTS
• The Volvo Group has wholly-owned factories in
18 countries around the world.
• Our industrial ­operations worldwide also include
parts distribution centers and logistics centers.
• There are assembly plants operated by independent
­companies at 10 locations around the world.
• All the Volvo Group’s wholly-owned production facilities
have third-party audited quality certificates and 95%
have environmental certificates.
• Our total energy use 2019 was 2,118 GWh whereof
48% was from renewable sources.
Deliveries 2019 2018
Trucks 232,769 226,490
Construction Equipment 86,885 82,564
Buses 9,731 8,426
Marine engines 18,135 20,006
Industrial engines 21,324 28,499
New industrial technologies to meet future opportunities
People, products and ways of working are impacted by automation,
electrification and connectivity. In our operations, we investigate,
develop, test and implement new technologies and ways of working
towards a more efficient industrial system in the future. Some of
these developments are made in pilot plants, arenas used for cross
functional interaction, co-development and cooperation across the
company. It is a pre-commercial production system that employs
new production technology based on physical parts and produces
small ­volumes of new technology-based products, mainly for the
purpose of learning, verifying and validating new technologies. In
parallel, an essential part of the learning journey towards the future
– considering the Production and Logistics environment – is people
and leadership competence development.
Our operations run training with a wide curriculum on electrifica-
tion. This has been deployed over the last years to engineers, work-
shop operators and other relevant professionals. Electrification
means electric drives, but also new supply chains and systems with
critical safety and regulations aspects.
 A GLOBAL GROUP 2019 VALUE CHAIN PRODUCTION & LOGISTICS

In several plants, there are many initiatives to develop ways of work-

ing in the future industrial worker environment. The purpose is to be
prepared and build required capabilities to meet the rapid develop-
ment of emerging technologies and the new manufacturing land-
scape.

Transforming for renewable energy

From a product life-cycle perspective, the main environmental
impact connected to Volvo Group is the emissions during the use of
sold products. However, the Group can also make significant
improvements in the way the operations are managed and we
deploy management systems to drive continuous improvements in
all relevant aspects. Energy is one of the environmental topics PHASING OUT FOSSIL ENERGY FROM OPERATIONS
WHERE POSSIBLE
where the Group has made significant improvements. The work can
be summarized in two main areas:
In 2019, Volvo Group has contracted new services for deliver-
1. Energy efficiency in operations
ies of renewable electricity. This has led to significantly
2. Increase utilization of renewable energy reduced Scope 2 CO2 emissions, mainly for the operations in
the US. One of the more energy intensive sites to secure
Energy efficiency renewable energy contracts during the year was Hagerstown
in Maryland, US. This, together with other initiatives, has led
Every kWh reduced saves costs and emissions. The Volvo Group’s
to 48% of energy now coming from renewable sources.
ambition is to implement energy saving projects that together save
150 GWh per year between 2015-2020. At the end of 2019, more

Energy use Scope 1 and 2 CO2 emissions, kton CO2 In order to more accurately
reflect the actual emissions
Scope 1 within Scope 2 and to recog-
nize the emission reduction
Scope 2
Absolute improvements, a change to
energy use Scope
1+2 by Market Based Reporting has
(GWh) net sales been implemented as from
Relative (tons/ 2019. Where applicable,
energy use SEK M)
average grid emission factors
(MWh/
have been changed to spe-
SEK M)
13 14 15 16 17 18 19 13 14 15 16 17 18 19 cific factors from the suppli-
20 68 77 76 68 96 18 255 231 220 211 207 223 211 ers. As a reference, location
2,3 2,1 2,0 2,0 2,0 2,1 2,1 based emissions would have
8.7 7.9 6.8 7.1 6.4 5.8 5.1 243 218 192 196 192 198 113
1.88 1.63 1.36 1.40 1.23 1.11 0.77 given 191,000 tons instead
of 113,000 tons.

Energy use per regions 2019 Scope 1 and 2 GHG emissions per region 2019

Sweden, 40% Sweden, 22% In line with the Greenhouse

Gas Protocol, the Volvo
Europe excl Sweden, 22% Europe excl Sweden, 19%
Group reports market-based
North America, 21% North America, 23%
energy (contractual emis-
Asia , 14% Asia, 33% sion factors). The diagrams
South America, 3% South America, 3% show both energy (MWh)
and emissions (CO2 ).

57
 A GLOBAL GROUP 2019 VALUE CHAIN PRODUCTION & LOGISTICS

than 1,000 energy saving projects have been implemented, resulting

in a annual saving of 170 GWh. Our energy use in 2019 amounted to
Energy sources, GWh 2019 2018 2017
2,118 GWh, which is a slight reduction from the previous year. At the
same time, both production volumes and deliveries were higher com- Electricity 998 1,031 981
pared to 2018. Our energy efficiency index, energy use per net sales, District heating 187 186 170
has been improved to 5.1 MWh/SEK M compared to 5.8 MWh/SEK Natural gas 551 574 538

M year over year, which is an improvement of 12%. Since 2015, this Diesel 207 219 192
Other 175 186 187
energy efficiency index has been improved by 25%.
Total 2,118 2,196 2,068

Greenhouse gas reporting

The Greenhouse Gas (GHG) Protocol is developed by the World
Resources Institute (WRI) and the World Business Council for Sus-
tainable Development (WBCSD). It sets the global standard for
how to measure, manage and report greenhouse gas emissions.
According to the GHG Protocol Corporate Standard a company’s
GHG emissions are classified into three scopes.
Scope 1 emissions are direct emissions from owned or controlled
sources. Scope 2 emissions are indirect emissions from the gener-
ation of purchased energy. All facilities using more than 2 GWh of
energy annually are included in the reporting. In 2019, scope 1 and
2 emissions together amounted to 324,000 (421,000) tons of CO2.
This is significantly lower than reported 2018 and is the result of
higher energy efficiency and an increased share of purchased elec-
tricity from renewable sources. In addition, a transition to mar-
ket-based reporting has been undertaken, which should be taken
into consideration when comparing results.
Scope 3 emissions are all indirect emissions that occur in the
value chain of the reporting company. There are 15 factors in the
scope 3 emissions. These occur outside the organization but are
related to the organization’s products, transports materials, leased
assets etc. Emissions from when products are in use represents
more than 95% of the Volvo Group’s total carbon footprint.
WWF commitment
As part of the Group’s commitment to the WWF Climate Savers
program, we have a target to reduce product lifetime emissions by
40 million ton CO2 2015–2020. For 2015–2019, the aggregated
savings were 34 million ton CO2.
As part of scope 3 emissions reporting, we also focus on carbon
emissions from freight transport involved in the supply of materials
and deliveries to customers. The target is to reduce CO2 emissions
from goods transports per produced unit by 20% by 2020, com-
pared to baseline 2013. In 2019 Volvo Group reached a reduction of
18% CO2 per produced unit. See page 35 for more information
about our WWF Climate Savers commitment.
Environmental policy and detailed performance
The Volvo Group’s Environmental Policy provides overall direction
on environmental management across the value chain. The Volvo
Group manages a number of other environmental aspects and
reports detailed management approach and data in accordance
with GRI Standards.
The following information is disclosed in accordance with the
Swedish Annual Accounts Act. In 2019 the Volvo Group had 12
licensed facilities in Sweden and there were no significant environ-
mental incidents. For some facilities the environmental permits are
under review due to planned changes. 

ALL IMPACTS MAT TER

REDUCING PACKING MATERIAL IN

BRAZILIAN DISTRIBUTION CENTER
Every hour, Volvo’s Central Distribution Center in Brazil receives thou-
sands of parts from Brazilian and global suppliers. The demand for
packaging handling is one of their significant environmental impacts.
Using Kaizen methodology, the center has been able to improve its
reuse and reduce with extraordinary savings since 2018 – reused
4,000 sheets of plastic bubble wraps, reduced 12 tons of cardboard
by reusable spacer replacement and avoiding 1,000 tons of wood by
reusing and repairing pallets and other wooden packaging material.

58
 A GLOBAL GROUP 2019 VALUE CHAIN PRODUCTION & LOGISTICS

MAJOR PRODUCTION FACILITIES

North America South America Europe Asia Africa and Oceania

Volvo Trucks New River Valley (US) Curitiba (BR) Blainville (FR), Göteborg, Bangalore (IN), Brisbane (AU),
Umeå (Cabs) (SE), Gent (BE), Bangkok (TH) ­Durban (ZA)
Kaluga (RU)
UD Trucks Ageo (JP), Pretoria (ZA)
Bangkok (TH)
Renault Trucks Blainville, Bourg-en-Bresse
(FR)
Mack Trucks Lehigh Valley (US) Brisbane (AU)
Eicher* Pithampur* (IN)
Dongfeng Trucks* Shiyan* (CN)

C onstruction Shippensburg (US) Pederneiras Arvika, Braås, Eskilstuna, Changwon (KR),

Equipment (BR) Hallsberg (SE), Konz-Könen, Shanghai,
Hameln (DE), Belley (FR), Linyi* (CN),
­Motherwell (UK) Bangalore (IN)
Buses St Claire, St Eustache, Curitiba (BR) Borås, Uddevalla (SE), Bangalore (IN),
St Francois du Lac (CA), Wroclaw (PL)
Mexico City (MX),
Plattsburgh (US)
Volvo Penta Lexington (US)   Göteborg, Vara (SE) Shanghai (CN)  
 ngines and
E Hagerstown (US) Curitiba (BR) Köping, Skövde (SE), Ageo (JP),  
transmissions Vénissieux (FR) Pithampur* (IN)

*Ownership ≥45%

59
 A GLOBAL GROUP 2019 VALUE CHAIN RETAIL & SERVICE

RE TA IL & SERV ICE

SUPPORTING CUSTOMERS
WITH MAXIMUM UPTIME

The technological transformation is driving new

business models and will require different skills
FACTS
in the future. This relates to both service person-
nel handling the products and sales staff guiding
• The Volvo Group’s products are sold and distributed through
the customers towards the best solutions.
wholly-owned and independent ­dealerships.
There­fore we are focusing on dealer develop-
• More than 1 million Volvo Group vehicles and machines are
ment programs and training support for our
­connected via different ­telematics solutions.
global dealer network to meet future ­challenges.
• During 2019, the service business represented approxi­mately
20% (20) of the Volvo Group’s net sales.

O
• Financial Services provided financing solutions for 25% (24)
of Group products in the markets where financing is offered.
• 90% of all distribution centers are certified with ISO 14001.
ne of our strategic priorities is to establish
• Environmental product information, based on life­cycle
brand-specific sales operations with a focus on assessment, is available for our products.
retail excellence and a growing service busi-
ness. The brand organizations within the Volvo
Group support customers via efficient dealer
workshops, and through service and mainte- minimizing unplanned stops, reducing spending on fuel and mainte-
nance agreements. With our service contracts and connected solu- nance and preventing future problems.
tions, customers know when their vehicle or machine is due for ser- Results from North America speak for themselves:
vice and what the cost will be for maintenance and repairs.
• Only 1% of units monitored by ActiveCare Direct, Volvo CE’s
We work together with our retail organization through continuous
telematics monitoring system, ever become critical machine-
improvement and dealer development programs to ensure our cus-
down cases.
tomers always get the best possible service. For instance, in 2019
• 85% improvement in resolution time for critical machine-down
Volvo Trucks introduced the Volvo Flexi-Gold Contract – a new
cases – most issues are resolved the same day they are reported.
usage-based service contract where monthly fee­s are broken down
• 97% improvement in the time to reach a Volvo Uptime Support
into fixed and variable parts (km-based) tailored to the vehicles’s
Specialist – due to team cross-training across all product lines.
actual mileage. This means hauliers have greater flexibility to adapt
Read more about how Volvo Group increases uptime for customers
their operations to market conditions and demand.
through connected services on page 28.

Improved customer productivity

AI – the future of uptime
Our sales staff is trained to offer tailored solutions to maximize pro-
Connectivity is a game-changer for vehicle uptime, and the Volvo
ductivity and uptime for our customers. Connected solutions help
Group’s brands are at the forefront, leveraging Group technology.
our customers to lower costs through fleet optimization programs
Connected trucks and machines provide data that can be turned into
and driver support systems. Combining connectivity and data ana-
knowledge, increasing uptime and creating value for customers. We
lytics is opening up new opportunities to support our customers.
have been monitoring certain components to optimize service plan-
Following the success with the North American Uptime Center,
ning and eliminate most unplanned stops for years. But some mal-
Volvo CE launched an EMEA Uptime Center in 2019, to become
functions have been difficult, if not impossible, to predict. Until now.
customers’ number one choice for uptime in Europe, the Middle
With Artificial Intelligence (AI), Volvo Trucks is taking the next step
East and Africa. Uptime Centers monitor data transmitted by con-
in predicting and preventing unplanned stops, improving uptime
nected machines and identify areas where uptime and efficiency
even further. Think of it as a truck’s sixth sense.
can be increased. The goal is to be proactive and provide solutions
We are applying new methods for monitoring and analyzing data
to problems before they happen. In fact, the majority of problems
from thousands of trucks in real time. This allows us to develop increas-
are things that are detected before the dealer or customer does.
ingly more intelligent computer models that can identify patterns hid-
Case handlers alert dealers to machine error codes and alarms so
den from human view and capabilities. When an imminent failure is
that they can take immediate action on behalf of their customers,

60
 A GLOBAL GROUP 2019 VALUE CHAIN RETAIL & SERVICE

Ways of growing the service business

Growing the sales of services is
*
of ­priority for the Volvo Group.
* One way is to increase the market
share and thereby grow the population
Total solutions *
of ­prod­ucts to service and another
Uptime services is to increase the penetration of ser-
Insurance Untapped potential Untapped market vices in the installed fleet.
Bundled services on existing fleet share potential
Financing
Workshop
Traditional Spare parts
Vehicles/Machines

Market share

detected, the customer’s local Volvo workshop is alerted so that pre- ready as soon as the truck comes in – minimizing stops and helping
ventive actions can be taken – ahead of time. This gives the work- to improve the profitability of trucking companies. 
shop a heads-up so that the right expertise and part or component is

RESPONSIBLE SALES

DRIVING SUSTAINABLE BUSINESS

The Volvo Group’s responsible sales approach was originally developed
in 2014 for alignment with the Swedish Export Credit Agency’s (EKN)
sustainability risk assessment for sales transactions, which they guar-
antee in connection with customer financing. Building on this, we have
continued to develop our approach to screen certain sales deals from
human rights, environmental, and business ethics perspectives in order
to identify potential risks as part of knowing the customer.

Integrating a corporate responsibility perspective in sales deals

We have processes and policies in place with the aim to ensure that we
do business in compliance with applicable laws and regulations, includ-
ing sanctions and export control regimes. On top of this, when export
credit agencies or certain private insurance companies are involved in
guarantees, we apply a corporate responsibility lens when screening
those deals. We are continuously working to expand the scope of
responsible sales screenings to beyond these specific deals.
In line with internal policies, we also perform risk assessments from
compliance, legal and corporate responsibility perspectives in sales
to selected governmental end-users in identified high-risk countries.
­Further, in 2019 we initiated the strengthening of internal procedures
on sales to high risk customers in conflict affected areas.
We identify sustainability risks through credible tools when perform-
ing these screenings. The risk levels of identified findings are assessed,
described and escalated to relevant forums within business areas or at
Group functions. Mitigation actions typically include engagement with
our customers on the findings, and in some cases adapting wordings in
our sales offer to mitigate the identified risks. If the risks are considered
to be high or not possible to mitigate, we may decide not to proceed with
individual sales deals. In our screenings, we consider country risk levels,
customer segments, end-users and potential end-use. Our ­business
areas have the responsibility to perform the screenings, with ­support
from Group functions when needed. When performing these screenings,
we use a risk matrix to classify identified risks and country risk ratings
based on credible international indices. In 2019, approximately 26% of
Volvo Group’s sales were to countries categorized as high risk.
Building capacity and furthering business opportunities
Volvo Trucks, Renault Trucks, Volvo CE and Volvo Buses screened
approximately 170 (105) sales deals in 2019, primarily in connection
with customer financing. We identified issues related to potential
adverse impacts on the environment and local communities, poor
employment conditions, occupational health and safety and unethical
business behavior in some of these screenings. These potential issues
were investigated further, often at business area or Group-level forums,
discussed with our customers for further clarification and for initiating
mitigating actions when needed.
In 2019, Volvo CE continued its efforts to build capacity and train
employees on responsible sales. Approximately 80 persons belonging
to customer finance, local sales and management in Asia, Eastern
Europe, Middle East, Africa and Latin America were trained. Volvo CE
also continued to raise awareness among its customer finance person-
nel across all sales regions.
Please see page 42 for more information on human rights.

61
 A GLOBAL GROUP 2019 VALUE CHAIN REUSE REDUCE RECYCLE REMAN

REUSE REDUCE RECYCLE REMAN

RESOURCE EFFICIENCY AND

INCREASED CIRCULARITY

The global economy is expected to grow signif-

icantly the next decades. At the same time, the
FACTS
notion of planetary boundaries, as well as vola-
tile and steadily increasing commodity prices,
• The Volvo Group has eight remanufacturing centers in
puts higher demands on all parts of the value
­Sweden, France, Japan, Brazil, USA, China and India,
chain. Putting our customer in the center of
­handling used components from our whole range of brands.
attention allows us to develop new business
• Remanufactured components are delivered with the same
opportunities and increase resource efficiency
or higher quality as a new one, with full warranty, often at
in a number of ways.
a better price.
• The cast iron in a Volvo Truck is made of 97% recycled iron.
• In 2019, 85% of residual products from operations were

I
­recycled, composted or incinerated with heat recovery.

ncreasing circularity revolves around extending service life

and operational uptime of assets. Here, the main elements
are to service, maintain and repair to increase the utilization
rate of all materials in the products. As we increase our ser-
vice-based business, the main output is uptime and availa-
bility of machines and vehicles. This is a prerequisite to focus
even more on recyclability and remanufacturing.
Remanufactured components are offered to Volvo Group’s cus-
tomers worldwide. Engines, gearboxes, rear axle transmissions and
other parts can be renovated to the same condition as new parts.
Remanufacturing can increase the performance to even better con-
dition and performance.
One example is a gearbox. In this case, a remanufactured one can
save 50%, and sometimes up to 80%, resources compared to a new
one. The saving comes from avoiding processing and refining new
materials and the associated energy and emissions. By offering gear-
boxes in different versions, tailor made to the actual need, the savings
achieved are even higher. The customers benefit from the same or
higher quality with full warranty, often delivered at a better price.
Distribution logistics
Volvo Group also works to continuously optimizing the transport net-
works to and from end-users. Many times, complex distribution net-
works do not facilitate circular business models due to shipping and
lead times. This challenge can be overcome by integrating remanufac-
turing, maintenance and repairs in an improved service offer.
Production
The Volvo Group works consistently with lean methodologies to use
less material as well as processes to integrate more recycled mate-
rials, reduce waste, energy and water usage.
Virtually all metal scrap from Volvo production operations are recy-
cled or reused. The choices of materials used are of increasing impor-
Estimated recyclability rate of
Volvo Group products
Excavators 95–99%
Trucks 85%
Buses 82%
tance. Many of the materials are decided at an early design phase.
Please refer to the Sustainability Notes on volvogroup.com/GRI2019
for a detailed report on recycling rates.
Recovery and end of life management
In terms of weight, a new vehicle from Volvo Trucks is made up of
about one-third from recycled material. Half the wrought iron
comes from recycled metal and 97% of the cast iron is made from
recycled iron. Using iron, steel and aluminum is favorable in term of
recyclability. The additional materials are mainly plastic, rubber and
material from electronic components. As the transport sector is
increasingly electrified and connected and more minerals as well as
other new components are built in, it becomes even more critical to
choose materials wisely at an early stage.
Sourcing recycled and recyclable materials
Some of the elements of circular economy relate directly to the
materials and suppliers chosen. Complex value chains mean diffi-
culties to assess the exact proportion of recycled materials but the
choices of components can still be targeted towards higher recycla-
bility. The incentive from a procurement perspective is simple. If we
choose recycled or recyclable materials and components, the cost

62
 A GLOBAL GROUP 2019 VALUE CHAIN REUSE REDUCE RECYCLE REMAN

INCREASED RESOURCE EFFICIENCY AND CIRCULARITY

RECOVERY SUPPLIERS
Recover materials and Carefully choose materials and
heat energy from pro- substances used in products.
cesses and materials.

REUSE DESIGN
Reuse Product
Remanufacture complex development The design phase is critical
parts. Recover and recy- and directly dependent on
cle scarce materials. the end-user’s preferences.

USE

factu nu-

Re
re

duc
Rema
Customer

e
DISTRIBUTION Retail
SOURCING
and service Purchasing
Optimized distribution Se Increasingly sourcing of
networks to reduce lead ­recycled and recyclable

ir
pa
ic
Re
rv
times. e materials.
ec M aintain
R

us

e
yc
le Re

Production
THE CUSTOMER USE PHASE and logistics

Maximize uptime and utilization of products,

components and materials. Service, mainte-
nance, repairs and remanufacturing are key
elements in this phase. We can also increase
PRODUCTION
circularity by offering a product as a service.
This enables longer operating life of the A continuous strive for increased Value chain
products, and of its components. recycling and minimizing waste. Recovery phases

over time will be lower as we can avoid some of the most significant
price increases in commodities.
Design phase
To help customers with smarter and more sustainable decisions,
Volvo Trucks has developed the Environmental Footprint Calculator,
see volvotrucks.com. Where the raw materials come from, energy
and materials consumption, emissions from our factories and how
to make our recycling more efficient, all are important aspects to
­consider when calculating the entire lifecycle.
Volvo Trucks evaluates the impact of its products through five main
parameters: materials and production, fuel, exhaust emissions, main-
tenance and end-of-life treatment (recycling). Focusing on the life-­
cycle of the vehicles means considering potential trade-offs and build-
ing in the best available solution. It also means working with materials
that can be easily recycled, reclaimed and remanufactured. For exam-
ple, plastic clips are used rather than metal clips to attach wires and
hoses. Metal clips take far longer to remove during the reclaiming pro-
cess, risking that fewer materials are recovered at the end of life.
A new age, revolving around circularity
Together with business partners Volvo Group has managed to extract
palladium and platinum from scrapped diesel particulate filters. The
environmental impacts and costs in terms of saved energy, landfill
and mining are substantial for these kind of materials. During 2019,
5.3 kg platinum and 5.8 kg p­ alladium were extracted; these minerals
can be used directly to make new particulate filters for Euro VI engines.
Volvo Penta launched factory remanufactured exchange engines for
an extended range of industrial engines during 2019. The range now
covers 5L, 8L, 9L and 13L engines. The offer is well received by our
service network, which indicates good opportunities for future
remanufacturing of additional ranges.
The Volvo Group also seeks to find synergies for second life of com-
ponents. Please see page 92 for an additional example on batteries. 
RECOVER ENERGY
Volvo Construction Equipment
operates one of its most energy
intensive sites in Eskilstuna, Swe-
den. The biggest processes in terms
of energy use at the plant are found
in the hardening center, where
machine parts are heated to a high
temperature and then cooled to ensure a strong surface and
a long life, and the paint shop, where components are
heated so the paint dries. During the year, the plant has
invested SEK 5 M in an energy recovery system that
recovers around 60% of the heat generated in the hardening
center and transfer it to paint shop. This is one of the actions
taken for the fulfillment of Volvo’s internal qualification crite-
ria on renewable energy and landfill-free facility.

63
 E M P L OY E E S

OUR PEOPLE
ARE OUR BIGGEST
STRENGTH
All successful organizations have one thing in common – skilled and engaged
people. The right talent and competence can be a scarcity if not actively
managed, and it is increasingly important for the Volvo Group to attract, retain
and develop the right people and to shape a culture that drives engagement
and thus performance.

64
 A GLOBAL GROUP 2019 EMPLOYEES

ADMIRED EMPLOYER

W
orking at Volvo should be purposeful, A global organization
rewarding and safe. The overall ambi- Regular employees 2019
tion is to tap into the potential from
every employee and use our individual
Europe
and collective strengths to perform
North America Asia
our current business and to transform
50,127
into tomorrow’s business needs. With our people as our biggest
strength, we will take the lead in driving prosperity through trans-
17,750 54% 16,863
port solutions.
19% 18%
Dialogue throughout the whole employment for
better performance
In today´s business environment, the change is constant and we
experience a rapid adoption of connected technologies that signifi- 5,466 2,369
cantly influence how we communicate and collaborate at work. In
the Volvo Group we aim to grow our people, which demands instant 6% 3%
feedback and active sharing.
To evolve effectively, the Volvo Group needs faster and more
South America Africa and Oceania
focused insights from employees. Getting frequent and focused
insights can help us make changes that are most impactful.
This year, the Volvo Group has continued the journey of enabling
dialogue by aiming for lifecycle listening covering all dimensions of
Number of employees Dec 31 2019 Dec 31 2018
dialogue. Individual dialogue has been strengthened through Per-
Blue-collar 50,936 53,065
formance Touchpoints between managers and employees, a quick
Whereof temporary
and demand-driven way of making sure we focus on the right activ- ­employees and consultants 4,506 6,501
ities. To enable the Volvo Group to listen more attentively on an indi- White-collar 53,049 52,110
vidual level but also from a Volvo Group perspective, we have Whereof temporary
launched our bi-yearly annual survey, Volvo Group Global Pulse. We ­employees and consultants 6,904 6,545
are moving a step further by including open-ended questions and Total number of employees 103,985 105,175
free text comments, which are facilitated by automated text analy- Whereof temporary
­employees and consultants 11,410 13,046
sis through machine learning, allowing us to capture even more
feedback from our employees. The scope also includes onboarding
and exit interviews to cover the whole employee lifecycle.

Develop leaders and attracting talents of tomorrow

Employee turnover 2019, by gender, age and total
In the Volvo Group, we see talented people as our most important
<40 40+ All
asset. We are both working with developing our leaders and attract-
Group Total 9.8% 5.9% 7.5%
ing new talents of tomorrow.
Men 9.9% 5.8% 7.4%
We want to secure a diverse leadership pipeline and stimulate
Women 9.5% 6.4% 7.7%
diversity through the Volvo Group Talent review. A structured cali-
bration where we look at performance and potential that secures a
solid succession planning with talented people in Volvo Group. To
develop our leaders, we have various leadership programs for differ- In Sweden we started a dedicated program called ACCELERATE
ent career levels within our organization. during 2019. This is a new thesis program within Volvo Group,
Volvo Group is used to collaborate with students and universities which provides a good opportunity for our future talents to grow
as a means to secure the competence of tomorrow with a close col- networks in their field to build their future careers. The program in
laboration with future employees. Every year we collaborate with 2019 included around 30 students who were given the opportunity
students from a number of universities around the world. to combine theory with practice and connecting this to the Volvo
Our collaborations with both engineering and business universities Group’s mission. For the program participants we offer a possibility
in Sweden, France, the US, China and Japan revolve around three main to write a Master or Bachelor thesis and grow with us through prod-
modules – research, learning and talents. Our Academic Partner Pro- uct experience sessions and development activities.
gram secures a good connection between Volvo Group expertise with The Volvo Group also offers four different graduate programs:
global academic research and innovation environments. International, Engineering, Operations and IT. Through these gradu-
ate programs we secure the future skills and increase the attraction
of Volvo Group as an employer.

65
 A GLOBAL GROUP 2019 EMPLOYEES

Education and development for everyone

The Volvo Group prepares for the future. To balance the competence
needs of today with future demands to support business change we
invest in training and competence development. To realize the need, we
have our very own corporate university as well as local training centers.
Volvo Group University (VGU) is our center for learning and competence
development. VGU develops, designs and provides training and learning
experiences well rooted in todays and future business needs.
VGU offers easily accessible training in a wide range of topics, some
of which are fundamental to all employees and some are specific for
different roles. Different formats are used to ensure the best learning
experience: on-line, on-the-floor, on-stage and classroom training, as
well as videos and games.
The local training centers in our production facilities provide CAREER DEVELOPMENT AND FUTURE
training such as introduction for new employees, Volvo Production PROOFING VOLVO GROUP
Systems and product training. Training programs within Volvo
Group are provided by an online platform open to all employees,
People, products and ways of working are impacted by auto-
which accelerates competence development, includes and engages mation, electrification and connectivity. Electrified vehicles
employees engaged in their learning and sharing journey. Every year means electric drives, but also new supply chains and trac-
the Volvo Group allocates approximately half a million training days tion voltage systems with critical safety and regulations
aspects. Artificial intelligence allows even more advanced
to our employees and retail organizations worldwide. During 2019,
products and services, as well as automation of internal pro-
over 150,000 participants attended training through Volvo Group cesses. Volvo Group University runs numerous learning pro-
University whereof 119,000 took part in online training and 31,000 grams to support the transformation, addressing new tech-
participated in trainer-led education.  nologies as well as mindset and change.
Volvo Group University also supports new employees,
who bring new skills and competences into the company to
develop skills in Volvo specific domains, such as vehicle
technology and manufacturing concepts.

HEALTH, SAFET Y AND WELL-BEING IN FOCUS

V
olvo Group’s Health and Safety Policy is built on
the belief that accidents, near misses and Health & Safety – Lost time accident rate
work-related illness can be prevented. We work
actively to minimize both the physical and psy-
chological risks in the workplace and in 2019 we
have focused on promoting a wide range of tools
about mental health. The toolbox consists of a number of tools,
workshops and assessments designed to prevent mental health
problems, promote performance and well-being at work, as well as 13 14 15 16 17 18 19
to build resilience to manage stress and to avoid over stress or 1.97 1.59 1.38 1.06 1.00 1.22 1.22
burn-out. 1 3 3 0 3 3 0
Lost time accident rate (LTAR)
Continuous improvements Number of fatal accidents
Over a longer time period the recordable accidents have been reduced. Lost time accident rate = Number of recordable accidents with lost
time × 200,000 hours/total number of worked hours for all
However, in 2018 and 2019 the accident rate increased to 1.22 per employees and consultants.
200,000 worked hours. The increase is concluded to be a com-
bined effect of more rigorous reporting, a larger scope of the opera-

66
 A GLOBAL GROUP 2019 EMPLOYEES

SAFETY IS ABOUT PUTTING

PEOPLE AT THE CENTER OF
EVERYTHING WE DO, IN OUR
OPERATIONS AND WITH OUR
PRODUCTS.

“I began working with road

­traffic safety soon after joining
Volvo Group in 2000. First, by
working on developing passive
safety systems and later as part
of the Accident Research Team,
which I went on to lead. “The
work with the Accident Research
Team was really interesting and
inspiring because you got to see
the everyday reality of ­drivers,
which is always much more
complex than in the lab.”

Anna Wrige Berling, Traffic &

Product Safety ­Director.

“A truly satisfying part of working

with safety is interacting with
­people. When someone tells you
after a talk ‘I will start wearing my
seatbelt now’, it gives a real sense
of accomplishment. You might
have saved that person’s life.”

67
 A GLOBAL GROUP 2019
tions included (100% of employees) with more aftermarket service
workshops, as well as related to higher production levels and more
activity in the workshops.
In the Volvo Group, we address health and safety in a number of
ways. 32 sites, or approximately 30% of our operations are certified
according to OHSAS 18001 or ISO 45001. These sites are externally
audited and we also carry out internal health and safety audits within
the scope of the Volvo Group Management System. In 2019, we
achieved zero accidents in 31 (27) plants. Safety is the first topic on the
agenda for the quarterly business review meetings, where the Volvo
Group’s executive board is involved in specific action plans with divi-
sions and business areas. In addition, at the highest level in the organ-
ization, the AB Volvo Board is briefed on occupational safety.  behavior. In 2019 the team of safety staff were strengthened
LABOR RELATIONS – BASED ON HONEST Y AND TRANSPARENCY
C
hange to stay ahead was the theme of the Volvo
Global Dialogue meeting held in September
2019 in Greensboro, US, at which around 50
employee representatives and union members
out of 20 different countries from the Global
Works Council (GWC) met with the Volvo Group
Executive Board and Group Management. Topics beside the busi-
ness area updates focused on the demands of the modern transpor-
tation market and the challenges that lie ahead, but also on the
changing competency requirements for employees for the trans-
formed future industrial environment.
Volvo Global Dialogue is one forum among several other dialogue
platforms. The Volvo Group’s European Works Council (EWC)
meets twice per year and is continually informed in ad hoc meetings
regarding organizational or major business changes. In 2019, 13 (5)
such information were conducted to secure a European alignment
of organizational changes. Following this forum, the country organ-
izations continue the dialogue with the country and local unions. In
2019, the Volvo Group conducted 60 (56) consultations with
employee and union representatives in the different countries
around different topics.
Three ordinary and two deputy members chosen by employee
organizations are part of the AB Volvo Board of Directors. This ena-
bles dialogue from management and employee perspectives early in
decision making at board level. The collaboration principles with all
employee and union representatives are based on honesty, trans-
parency, fairness and win-win, and being creative to develop out-of-
the-box solutions for complex topics.
68
EMPLOYEES
CELEBRATING BEST PRACTICES, AND HIGHLIGHTING
ACCIDENTS WAITING TO HAPPEN
The Volvo Group Health & Safety Award was established in
2006 with the aim to highlight safety and health-related
efforts and to inspire everyone to invest in safe working condi-
tions and health promotion. Over the past 13 years the number
of applications for the award has continued to increase, and
the results of these projects become even more tangible.
In 2019, 58 initiatives were in the race, each and every one
of them highlighting a fresh and innovative improvement.
At the same time, we work to learn from near-misses or unsafe
to be able to work more proactively.
Restructuring and changes in the workforce
Involuntary redundancies increased slightly from 1.3% of the total
workforce in 2018 to 1.7% in 2019. It was mainly related to busi-
ness downturn affects in some markets, especially in the manufac-
turing and operations area in the USA and Belgium. However, the
Volvo Group employed about 450 regular employees more in the
end of 2019 compared to 2018.
When there are major changes in our organization, employee rep-
resentatives and relevant government authorities are informed in
accordance with legal and contractual requirements. Not only do
statutory and contractual notice periods guide us in the timeline for
this, but also the creation of alternative solutions for outplacement,
such as time-banks or governmental sponsored working-time
shortages in collaborative work with the employee and union repre-
sentatives. In case of formal redundancies, we also use measures
such as internal mobility forums and outplacement support, when
appropriate.
Freedom of association
The dialogues and relationship with our employee and union repre-
sentatives results also in Collective Bargaining Agreements around
the world that cover about 73% (73%) of our regular employees in
23% (23%) different countries. As stated in our Code of Conduct,
the Volvo Group respects the right of all employees to form and join
a union or their choice to refrain from doing so and we estimate that
some 42% (42%) of the regular employees are members of an inde-
pendent trade union. This shows also a significantly higher union
density rate than the average compared to the International Labor
Organization statistics in our major markets like Sweden, the US,
Japan or Brazil. 
 A GLOBAL GROUP 2019 EMPLOYEES

INCLUSION AND DIVERSIT Y HELP TO RELEASE OUR THE FULL POTENTIAL

I
n the Volvo Group, we know that an inclusive work environ-
ment unlocks the hidden potential of diversity and drives per-
Gender diversity, share of women in Volvo Group, %
formance by enriching our creativity, allowing us to be more
2019 2018 2017 2016 2015
innovative and improving our decision making. All of the
diverse dimensions that make up our individual backgrounds All employees 19 18 19 18 18
give each of us a valuable, unique perspective. Leveraging this Manager (all levels) 20 19 19 18 18

diversity is essential for business success, as it allows all employees Presidents and other
senior executives 26 25 25 24 22
to release their passion and contribute to their full potential. For more
AB Volvo Board
than a decade, we have worked systematically to increase both diver- (excluding deputies) 40 40 36 36 33
sity and inclusion, with the aim of making our workforce and manage-
ment reflect the diversity of the regions in which we operate.

Diversity and inclusion labs

For 2019, the Volvo Group has continued to roll out its innovative
“Diversity & Inclusion Labs” concept. The three types of D&I labs pro-
vide a framework for learning, problem solving or perspective taking.
The Learning Lab allows participants to gain knowledge and learn
practical, hands-on techniques for boosting diversity and creating
inclusion. The Solution Lab enables the organizer to set a goal and
participants to co-create a solution by using an innovation process
such as design thinking. The Bounce Lab is designed to better under-
stand a problem or gain a new perspective. Participants with an inter-
est in the topic give their viewpoints on the situation at hand, e.g.
“why do we not have more women applying for jobs in production?”.
2019 also saw the launch of our Module II training for Diversity
and Inclusive Leadership, helping leaders to break down the con-
crete building blocks of an inclusive organization.
Examples of other actions include the D&I Champions network
composed of senior business leaders who act as visible role models
and work hand in hand with Human Resources on diversity and
inclusion strategies.
The Group also added our first employee inclusion network focusing
on diverse abilities and inclusion of people with disabilities.
Raising awareness of LGBTQ
The Volvo Group is committed to treating all our employees equally
regardless of their sexual orientation, just as with any other aspect
of diversity.
In 2019, we continued our active sponsorship of the local West
Pride event in Gothenburg with speakers from Volvo Group on the
theme of Radicals in the corporate world. Hundreds of Volvo
employees took part in the parade in Gothenburg, expressing their
commitment for human rights.
Our V-EAGLE LGBTQ+ employee inclusion network continues
to promote inclusion through information sessions based on our
manager’s guide on sexual orientation and gender identity. Its
objective is to raise awareness of LGBTQ+ issues, combat stereo-
types and prejudice, and ensure that a wide variety of individuals
and family situations are recognized by the company. 

Volvo Trucks’ management team; the most diverse in the industry

The Executive Management Team of Volvo Trucks includes greater Across the Volvo Group, the
representation of different genders, nationalities, ages and back- share of women in management
grounds than any other truck manufacturer. Of the 13 members of the positions has increased from 10
Volvo Trucks management team, six are women and four different to 20% since the beginning of
nationalities are represented: Swedish, Brazilian, Dutch and American. the century. But diversity is not
“Diversity reflects the environment we operate in. Internally with only about gender, age, ethnicity
our people, as well as externally when it comes to our customer or other category; it is also
base, it is important that we reflect this diversity. We are convinced about thought, backgrounds and
that our diversity and inclusiveness makes for better discussions work experiences. The importance is to build an inclusive culture
and more robust decisions. This is because people with different where commitment and knowledge are appreciated and utilized.
backgrounds automatically bring different perspectives and can It is the combination of diversity and inclusion that will ultimately
challenge one another in their thinking”, says Helena Arensberg, contribute to business success.
SVP HR at Volvo Trucks.

69
 GLOBAL STRENGTH

CONTINUED GOOD
DEMAND IN MANY
MARKETS
The Volvo Group is the world’s second largest manufacturer of heavy-duty trucks, one
of the largest m
­ anufacturers of buses and construction equipment and is also
a leading manufacturer of heavy-duty diesel engines as well as marine and industrial
engines. Demand continued to be good in many markets in 2019, but with a weaker
development in the second half of the year.

SHARE OF NET SALES BY MARKET 2019 SHARE OF NET SALES BY SEGMENT 2019

Group Functions & Other, 2% Trucks, 64%

Financial Services, 3%
Africa and Oceania, 6% Europe, 38%
Volvo Penta, 3%
Asia, 19% Buses, 7%

South America, 7% Construction

Equipment, 21%
North America, 30%

70
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 GLOBAL STRENGTH

Market development, heavy-duty trucks, Market development in Volvo CE product ranges,

Thousands construction equipment, Thousands

1,280 320

640 160
320
80
160
40
80

40 20

20 10
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019*
270 300 307 322 323* Europe 30 115 126 148 167 176 Europe
302 243 244 311 336 North America 111 106 117 134 141 North America
42 30 32 53 75 Brazil 21 15 17 21 25 South America
44 47 47 48 50 Japan 184 178 200 219 197 Asia (excl. China)
210 220 251 306 194 India 116 127 220 292 315 China
551 733 1,117 1,148 1,174 China *Estimate 29 28 34 35 32 Africa and Oceania

*Rolling 12 months per November

• Registrations of heavy-duty trucks in Europe 28 continued to be high,

EUROPE 265,000 units per November was on the same level as during the same
period in 2018.
• Net sales: SEK 163,748 M (160,591)
•V  olvo Trucks’ market share of 15.5% as of November was lower than
• Share of net sales: 38% (41)
the 16.0% in 2018. Renault Trucks m ­ arket share was 8.7% (8.8).
• Number of regular employees: 50,127 (49,694)
•T  he construction equipment market grew by 6% as of November.
• Share of Group regular employees: 54% (54)
However demand weakened during the course of the year.
• L
 argest markets: France, the UK, Germany, R
­ ussia and Sweden.

AFRICA AND OCEANIA ASIA

• Net sales: 25,750 M (25,182) • Net sales: SEK 79,951 M (76,976)
• Share of net sales: 6% (6) • Share of net sales: 19% (20)
• Number of regular employees: 2,369 (2,474) • Number of regular employees: 16,863 (16,888)
• Share of Group regular employees: 3% (3) • Share of Group regular employees: 18% (18)
• Largest markets: Australia, South Africa, ­New Zealand and Morocco. • L
 argest markets: China, Japan, South Korea, India and Indonesia.

• Demand for heavy-duty trucks in Australia declined by 10% from
high levels.
• T he truck market in South Africa was stable on a good level, while
demand in northern Africa continued to be weak.
• D emand for construction equipment was soft in markets which have
a large ­exposure to mining and resources.
• T he Chinese market for construction equipment grew by 8% as of
November, with a positive development for both excavators and wheel
loaders.
• Out of the Group’s main truck markets in Asia, demand continued to
be good in China and Japan while the Indian heavy-duty truck market
declined substantially ­compared with 2018.

NORTH AMERICA SOUTH AMERICA

• Net sales: SEK 131,310 M (106,948) • Net sales: SEK 31,221 M (21,138)
• Share of net sales: 30% (28) • Share of net sales: 7% (5)
• Number of regular employees: 17,750 (17,845) • Number of regular employees: 5,466 (5,228)
• Share of Group regular employees: 19% (19) • Share of Group regular employees: 6% (6)
• L
 argest markets: The US, Canada and Mexico. • L argest markets: Brazil, Peru, Chile and Colombia.

• T he heavy-duty truck market increased by 8% compared with 2018.
However, order intake declined significantly during the course of
the year.
• Volvo Trucks lost market share while Mack gained some share.
Volvo Trucks came in on 9.2% (10.3) and Mack on 7.0% (6.7).
• T he construction equipment market by 6% as of November,
mainly due to increased demand for larger machines.
• Demand in the important Brazilian truck market was strong, with
a market increase of 42% for heavy-duty trucks.
• Demand in other South American markets was more muted, but
with Volvo Trucks gaining market share.
• T he South American construction equipment market increased by
17% from low levels, mainly driven by Brazil.

71
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
SIGNIFICANT EVENTS
SIGNIFICANT EVENTS
PUBLISHED IN QUARTERLY
REPORTS DURING 2019
Sale of shares in WirelessCar completed
On March 29, the Volvo Group completed the previously announced
divestment of 75.1% of the shares in its wholly-owned subsidiary
WirelessCar to the Volkswagen Group. The sales price amounted to
SEK 1,174 M. The divestment resulted in a positive impact on oper-
ating income of SEK 1,466 M and a positive cash flow effect of SEK
1,174 M in the first quarter of 2019.
Annual General Meeting of AB Volvo
The Annual General Meeting of AB Volvo held on April 3, 2019,
approved the Board of Directors’ motion that an ordinary dividend
of SEK 5.00 per share and an extraordinary dividend of SEK 5.00
per share should be paid to the shareholders. The income statement
and balance sheet as well as the consolidated income statement
and the consolidated balance sheet were adopted. The Board Mem-
bers, Board Deputies and the President were discharged from liabil-
ity for their administration during the 2018 fiscal year.
Matti Alahuhta, Eckhard Cordes, Eric Elzvik, James W. Griffith,
Martin Lundstedt, Kathryn V. Marinello, Martina Merz, Hanne de
Mora, Helena Stjernholm and Carl-Henric Svanberg were reelected
as members of the Board. Carl-Henric Svanberg was reelected as
Chairman of the Board.
A remuneration policy for senior executives was adopted in
accordance with the Board of Directors’ motion.
VOLVO GROUP PRESS RELEASES 2019
THE FIRST QUARTER
1/3/2019 Volvo Group makes a provision of SEK 7 bn relating to estimated costs to
address degrading emission control component issue 1/15/2019 Volvo Group Ven-
ture Capital invests in wireless electric charging 1/16/2019 Invitation to press and
analyst conference in Stockholm 1/16/2019 Volvo Construction Equipment goes
electric on smaller machines 1/30/2019 Volvo Group – the fourth quarter and full
year 2018 2/1/2019 ElectriCity takes to the water with Volvo Penta 2/18/2019
Volvo Financial Services launches 10-week iLabX program with 7 start-ups
2/28/2019 Annual General Meeting of AB Volvo 3/12/2019 AB Volvo publishes
Annual and Sustainability Report 2018 3/28/2019 CampX by Volvo Group shapes
the future of the transport industry 3/29/2019 Volvo Group has completed the sale
of shares in WirelessCar
72
SIGNIFICANT EVENTS
Vera’s first assignment
In June, it was announced that Volvo Trucks’ electric, connected
and autonomous vehicle called Vera will form part of an integrated
solution to transport goods from a logistics center to a port terminal
in Gothenburg, Sweden. The assignment is a result of a new collab-
oration between Volvo Trucks and the logistics company DFDS.
Partnership with NVIDIA
In June, the Volvo Group signed an agreement with NVIDIA to
jointly develop the decision making system of autonomous com-
mercial vehicles and machines. Utilizing NVIDIA’s end-to-end artifi-
cial intelligence platform for training, simulation and in-vehicle com-
puting, the resulting system is designed to safely handle fully
autonomous driving on public roads and highways. The solution will
be built on NVIDIA’s full software stack for sensor processing, per-
ception, map localization and path planning, enabling a wide range
of possible autonomous driving applications, such as freight trans-
port, refuse and recycling collection, public transport, construction,
mining and forestry. The system is planned to be used first in com-
mercial pilots and later in commercial offerings.
Strategic alliance with Samsung SDI
In July, the Volvo Group and Samsung SDI entered into a strategic
alliance to develop battery packs for the Volvo Group’s electric
trucks. Samsung SDI intends to provide battery cells and modules
THE SECOND QUARTER
4/2/2019 Volvo Group Capital Markets Day 2019 4/3/2019 Annual General Meet-
ing of AB Volvo 4/10/2019 Invitation to press and analyst conference in Stockholm
4/10/2019 Professor Sonia Yeh awarded with Håkan Frisingers scholarship for
innovative research on mobility 4/24/2019 Volvo Group – the first quarter 2019
5/2/2019 Volvo Financial Services’ iLABX program draws to a close with a Demo
Day 5/8/2019 Mack Trucks unveils fully electric refuse demonstration model
5/22/2019 Electric Site wins Volvo Technology Award 5/23/2019 Volvo Construc-
tion Equipment and SDLG take next step in China 6/13/2019 Vera’s first assign-
ment: Volvo Trucks presents an autonomous transport between a logistics centre
and port 6/18/2019 Volvo Group partners with NVIDIA to develop advanced AI
platform for autonomous trucks 6/18/2019 Volvo Group Capital Markets Day –
“Perform and Transform” 6/28/2019 New number of votes in AB Volvo
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
to meet the demand for the Volvo Group’s electric trucks. The
intention is that Volvo Group will utilize Samsung SDI’s battery
pack technology for assembly in the Volvo Group’s manufacturing
operations.
One million connected customer units
On October 3, it was announced that the Volvo Group had delivered
more than one million connected customer units, in terms of deliv-
ered trucks, buses, and construction equipment. The large amount
of data collected is used to improve productivity by increasing vehi-
cle and machine uptime, reducing emissions and noise, as well as
improving traffic and site safety.
New business area for autonomous transport solutions
On October 18, the Volvo Group announced that it will create a new
business area for autonomous transport solutions. Volvo Auto­
nomous Solutions will accelerate the development, commercializa-
tion and sales of autonomous transport solutions. This is expected
to enable the Volvo Group to meet a growing demand and to offer
the best possible solutions to customers in segments such as min-
ing, ports and transport between logistics centers, as a comple-
ment to today’s products and services. Volvo Autonomous Solu-
tions is a new business area as of January 1, 2020. Its financial
results will be reported as part of the Trucks segment.
Heavy-duty electric concept trucks from Volvo Trucks
In December, Volvo Trucks presented heavy-duty electric concept
trucks for construction operations and regional transport. Volvo
Trucks believes that electrification can become a competitive alter-
native also for heavier trucks.
New appointments to Group management
In December, Scott Rafkin, previously President of Volvo Financial
Services, was appointed to the new position of Executive Vice Pres-
ident and Chief Digital Officer for the Volvo Group. Nils Jaeger, pre-
viously President Region EMEA, Volvo Financial Services, was
THE THIRD QUARTER
7/4/2019 Invitation to press and analyst conference in Stockholm 7/18/2019
Volvo Group and Samsung SDI enter strategic alliance for electromobility
7/18/2019 Volvo Group – the second quarter 2019 8/30/2019 New number of
votes in AB Volvo 9/30/2019 New number of votes in AB Volvo
SIGNIFICANT EVENTS
Scott Rafkin Nils Jaeger
appointed President of the new Volvo Group business area Volvo
Autonomous Solutions. Both Scott Rafkin and Nils Jaeger assumed
their new positions on January 1, 2020.
Volvo Group and Isuzu Motors intend to form
strategic alliance
On December 18, the Volvo Group and Isuzu Motors signed a
non-binding Memorandum of Understanding with the intent to form
a strategic alliance within commercial vehicles. In a first step, the
intention is to establish a global technology partnership and to create
a stronger, combined heavy-duty truck business for Isuzu Motors
and UD Trucks. This will entail transferring ownership of the com-
plete UD Trucks business globally from the Volvo Group to Isuzu
Motors. The enterprise value for the complete UD Trucks business is
JPY 250 billion (approx. SEK 22 billion as per the end of November
2019) and will be subject to the final scope of the business trans-
ferred and Isuzu Motor’s due diligence. The transaction is expected
to, at the time of closing, result in a positive impact on the Volvo
Group’s operating income of approximately SEK 2 billion and increase
the Volvo Group’s net cash position by approximately SEK 22 billion.
Signing of binding agreements is expected by mid-2020 and closing
of the transaction is expected by the end of 2020. All potential trans-
actions will be subject to regulatory and other approvals. 
THE FOURTH QUARTER
10/3/2019 The Volvo Group passes the milestone of one million connected customer
assets for increased sustainability, uptime and safety 10/4/2019 Invitation to press
and analyst conference in Stockholm 10/7/2019 Ecologist Terry Chapin, creator of
the concept of Earth Stewardship, receives the Volvo Environment Prize 2019
10/18/2019 The Volvo Group creates new business area for autonomous transport
10/18/2019 Volvo Group – the third quarter 2019 10/21/2019 Volvo Group Venture
Capital invests in cyber security 10/31/2019 New number of votes in AB Volvo
11/5/2019 Volvo receives Europe’s largest order for electric buses 11/6/2019 Volvo
Trucks launches sales of electric trucks for urban transport 12/5/2019 Volvo Group
Venture Capital invests in software for autonomous mobility 12/9/2019 Volvo Group
Venture Capital invests in Autotech Ventures 12/13/2019 Scott Rafkin appointed
Volvo Group Chief Digital Officer 12/18/2019 Volvo Group and Isuzu Motors intend
to form strategic alliance 12/20/2019 Nils Jaeger appointed President Volvo Auton-
omous Solutions 12/20/2019 Save the date for the Volvo Group Capital Markets Day
2020 12/30/2019 New number of votes in AB Volvo
73
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 Financial performance

FINANCIAL PERFORMANCE

IMPROVED PROFITABILITY
For the Volvo Group, 2019 was a year with high volumes and improved profitability.

INCOME STATEMENTS VOLVO GROUP

Industrial Operations Financial Services Eliminations Volvo Group

SEK M 2019 2018 2019 2018 2019 2018 2019 2018

Net sales Note 6, 7 418,361 378,320 14,870 13,070 –1,252 –555 431,980 390,834
Cost of sales –319,055 –296,109 –9,091 –7,924 1,252 555 –326,895 –303,478
Gross income 99,306 82,210 5,779 5,146 – – 105,085 87,357

Research and development expenses –18,539 –15,899 – – – – –18,539 –15,899

Selling expenses –30,483 –28,642 –2,554 –2,248 – – –33,037 –30,890
Administrative expenses –5,887 –5,756 –13 –43 – – –5,901 –5,798
Other operating income and expenses  Note 8 230 –1,828 –445 –445 –6 – –221 –2,273
Income from investments in joint
­ventures and associated companies Note 5, 6 1,859 1,948 – – – – 1,859 1,948
Income/loss from other investments 285 33 0 0 – – 285 33
Operating income 46,771 32,067 2,766 2,411 –6 – 49,531 34,478

Interest income and similar credits 320 199 – – 0 0 320 199

Interest expenses and similar charges –1,673 –1,658 0 0 0 0 –1,674 –1,658
Other financial income and expenses Note 9 –1,346 –870 – – – – –1,345 –870
Income after financial items 44,071 29,738 2,767 2,411 –6 – 46,832 32,148

Income taxes Note 10 –9,650 –6,172 –688 –613 1 – –10,337 –6,785

Income for the period 34,422 23,566 2,079 1,798 –5 – 36,495 25,363

Attributable to:
Owners of AB Volvo 35,861 24,897
Non-controlling interest 635 466
36,495 25,363

Basic earnings per share, SEK Note 19 17.64 12.25

Diluted earnings per share, SEK Note 19 17.64 12.24

OTHER COMPREHENSIVE INCOME

SEK M 2019 2018

Income for the period 36,495 25,363

Items that will not be reclassified to income statement:
Remeasurements of defined benefit pension plans  Note 20 –2,969 –579
Remeasurement of holding of shares at fair value Note 19 10 14
Items that may be reclassified subsequently to income statement:
Exchange differences on translation of foreign operations 2,616 2,350
Share of Other comprehensive income related to joint ventures and associated companies 252 0
Accumulated translation difference reversed to income – –94
Other comprehensive income, net of income taxes –91 1,691
Total comprehensive income for the period 36,403 27,054

Attributable to:
Owners of AB Volvo 35,738 26,536
Non-controlling interest 665 518
  36,403 27,054

74
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 Financial performance

Net sales
During 2019, net sales increased by 11% to SEK 432 billion (391).
Adjusted for currency movements and acquired and divested oper-
ations the increase was 5%.
Vehicle sales increased by 6% adjusted for currency movements,
primarily as an effect of increased sales of trucks and buses. Service
sales increased by 4% adjusted for currency movements, primarily
related to price realization.
Net sales in Trucks increased, driven by higher truck deliveries in
both North and South America. This was partly offset by lower
deliveries in Europe.
Construction Equipment had a positive sales trend where
increases in Europe and Asia were partly offset by declines in Africa
and Oceania. Buses increased sales in all markets. Volvo Penta
sales decreased mainly due to the slowdown for industrial off-road
engines, which was further accentuated due to a pre-buy in Europe
2018.
The Volvo Group’s sales of defense material, as defined in the
Swedish Military Equipment Ordinance (1992:1303) section A,
amounted to 0,51% of net sales in 2019, compared to 0,33% in
2018.
ings was primarily an effect of improved prices and mix for new
vehicles as well as increased service earnings. This was partly offset
by higher research and development and selling expenses. The
adjusted operating income included capital gains from sale of real
estate amounting to SEK 0.7 billion. The adjusted operating margin
increased to 11.1% (10.4).
Adjusted operating income excludes a capital gain of SEK 1.6 bil-
lion from the sale of the majority of Volvo Group’s holding of shares
in WirelessCar. In 2018, the adjusted operating income excluded a
provision of SEK 7 billion related to estimated cost to address an
issue with an emission control component as well as a gain of SEK
0.8 billion from the sale of shares in Inner Mongolia North Hauler
Joint Stock Co., Ltd. Reported operating income in 2019 amounted
to SEK 49.5 billion (34.5).
Net sales, SEK bn Operating income, SEK M

Operating income
2019 was another good year for the Volvo Group. The adjusted oper-
ating income increased by SEK 7.2 billion to SEK 47.9 billion (40.7)
15 16 17 18 19 15 16 17 18 19
including a positive currency effect of SEK 4.3 billion. Trucks, Con- 313 302 333 391 432 23,318 20,826 29,678 34,478 49,531
struction Equipment, Buses and Financial Services all recorded
their highest adjusted operating income so far. The increased earn-

Net sales by operating segment, Adjusted operating income by

SEK M 2019 2018 % operating ­segment, SEK M 2019 2018

Trucks 276,647 250,358 11 Trucks 31,552 26,351

Construction Equipment 88,606 84,238 5 Construction Equipment 11,910 11,306
Buses 31,019 25,826 20 Buses 1,337 765
Volvo Penta 13,287 13,741 –3 Volvo Penta 1,876 2,341
Group Functions & Other 12,287 7,568 62 Group Functions & Other –1,510 –2,503
Eliminations –3,484 –3,411 –2 Eliminations –14 –12
Industrial Operations 418,361 378,320 11 Industrial Operations 45,150 38,249
Financial Services 14,870 13,070 14 Financial Services 2,766 2,411
Reclassifications and eliminations –1,252 –555 –
Volvo Group1 431,980 390,834 11 Reclassifications and eliminations –6 –
Volvo Group adjusted operating income 47,910 40,660
1 Adjusted for changes in currency rates and acquired and divested units,
net sales increased by 5%. Adjustments¹ 1,621 –6,182
Volvo Group operating income 49,531 34,478
Net sales by market area, SEK M 2019 2018 %
1  For more information on adjusted operating income, please see section for
Europe 158,985 155,140 2 Key ratios.
North America 125,855 102,383 23
South America 29,739 19,914 49 Adjusted operating margin, % 2019 2018
Asia 78,914 76,177 4
Africa and Oceania 24,869 24,705 1 Trucks 11.4 10.5
Total Industrial Operations 418,361 378,320 11 Construction Equipment 13.4 13.4
Buses 4.3 3.0
Of which: Volvo Penta 14.1 17.0
Vehicles 332,558 299,356 11 Industrial Operations 10.8 10.1
Services 85,804 78,963 9 Volvo Group adjusted operating margin 11.1 10.4
Volvo Group operating margin 11.5 8.8

75
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 Financial performance

Change in operating income, Change Key operating ratios, Industrial Operations, % 2019 2018
Volvo Group (excluding Currency Gross margin 23.7 21.7
SEK bn currency) impact Total
Research and development expenses
Operating income 2018 34.5 as percentage of net sales 4.4 4.2
Change in gross income Industrial Selling expenses as percentage of net sales 7.3 7.6
operations 10.9 6.2 17.1 Administrative expenses as percentage of net sales 1.4 1.5
Change in gross income Financial Operating margin 11.2 8.5
Services 0.6 0.0 0.6
Higher credit losses –0.2 0.0 –0.2
Expenses by nature, SEK M 2019 2018
Gain on sale of in-/tangible assets 0.2 0.0 0.2
Material cost (freight, distribution, warranty)
Higher capitalization of development cost 0.2 0.0 0.2 and purchased services 271.021 256.067
Higher research and development Personnel 64.191 59.998
expenses –2.4 –0.4 –2.8
Amortization/depreciation 20.585 18.440
Higher selling and administrative
expenses –0.8 –1.4 –2.2 Other 28.574 21.559
Sale of WirelessCar 2019 1.6 0.0 1.6 Total 384.371 356.064
Sale of Inner Mongolia North Hauler Joint
Stock Co.Ltd shares 2018 –0.8 0.0 –0.8
Income from investments in joint
ventures and associated companies 0.7 0.0 0.7 Research and development expenses
Volvo profit sharing program 0.1 0.0 0.1
Other 0.6 –0.1 0.5 Research and
development
Operating income 2019 10.7 4.3 49.5 expenses, SEK bn

Research and
development
expenses,
Impact of exchange rates on operating income,
% of Industrial
Volvo Group, Compared with preceding year, SEK M
Operations’
Net sales1 21,591 net sales
Cost of sales –15,436 15 16 17 18 19

Research and development expenses –425 15.4 14.6 16.1 15.9 18.5
Selling and administrative expenses –1,432 5.1 5.0 5.0 4.2 4.4

Other –47
Total effect of changes in exchange rates
on operating income 4,252

1 The Volvo Group sales are reported at monthly average rates.

Impact of exchange rates on operating income
Operating income for 2019 in the Volvo Group was positively
impacted by approximately SEK 4.3 billion from changes in exchange
rates. The positive impact was related to net flows in foreign cur-
rency by SEK 2.0 billion, revaluation of receivables and liabilities by
SEK 0.3 billion and translation of operating income in foreign sub-
sidiaries by SEK 2.0 billion.
The net flows in foreign currency were positively impacted by the
appreciation of USD, GBP and CAD, offset by a negative impact
from the appreciation of KRW.
 ead more in Note 4 Goals and policies in financial risk management
R divestment of the majority of Volvo Group shares in WirelessCar as
regarding Industrial Operations transaction exposure from operating net
flows, graph 4:5 , as well as currency impact on sales and operating income.
was partly offset by lower outstanding debt. Other financial income
and expense amounted to SEK –1.3 billion (–0.9). The change com-
pared to 2018 was primarily related to unrealized revaluation and real-
ized result on derivatives.
Read more in Note 9 Other financial income and expenses.
Income taxes
The tax expense for the year amounted to SEK 10.3 billion (6.8)
corresponding to an effective tax rate of 22% (21). The tax rate was
impacted mainly by the non-taxable capital gain related to the
well as tax settlements.

Income for the period and earnings per share

Net financial items
In 2019 the income for the period amounted to SEK 36,495 M
Compared to the preceeding year, interest income increased by SEK
(25,363). Earnings per share amounted to SEK 17.64 (12.25) and
0.1 billion SEK to SEK 0.3 billion , as a result of higher cash assets.
diluted earnings per share to SEK 17.64 (12.24). Return on total
Interest expenses amounted to SEK 1.7 billion (–1.7). During the year
equity was 27.0% (21.3). 
interest expenses on lease liabilities have increased as a result of apply-
ing the new lease accounting standard as of January 1, 2019, which

76
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
FINANCIAL POSITION
CONTINUED STRENGTHENED FINANCIAL POSITION
Balance sheet
Total assets in the Volvo Group amounted to SEK 524.8 billion as of
December 31, 2019, an increase of SEK 50.2 billion compared to
year-end 2018. Applying the new lease accounting standard total
assets increased by SEK 6.2 billion. Currency effects from revalua-
tion of assets in foreign subsidiaries had a positive impact of SEK
13.1 billion. Adjusted for both currency effects and the impact from
the new lease accounting standard total assets increased by SEK
30.9 billion. The increase was mainly in cash and cash equivalents
and customer-financing receivables, counterbalanced by a decrease
in inventory. Customer-financing receivables increased by SEK
20.2 billion, offset by a decrease of SEK 4.1 billion related to a
reclassification of assets held for sale. The increase is an effect of
higher new business volume in Financial ­Services. Cash and cash
equivalents increased by SEK 14.5 billion as an effect of the positive
operating cash flow. Inventory levels decreased by SEK 9.1 billion,
whereof SEK 5.5 billion was related to reclassification of assets
held for sale.
Read more in Note 15 Customer-financing receivables.
Read more in Note 17 Inventories.
Read more in Note 18 Cash and cash equivalents.
The net value of assets and liabilities held for sale increased by SEK
22.2 billion during the year, mainly due to the intention to transfer
ownership of the complete UD Trucks business globally from the
Volvo Group to Isuzu Motors.

Read more in Note 3 Acquisitions and divestments of shares in
­subsidiaries, regarding assets and liabilities held for sale.
Investments in joint ventures and associated companies increased
by SEK 1.8 billion during the year, mainly driven by the profits in
Dongfeng Commercial Vehicle Co. Ltd.

Read more in Note 5 Investments in joint ventures, associated
­companies and other shares and participations.
The net value of assets and liabilities related to pensions and similar
obligations amounted to a liability of SEK 18.3 billion as of December
31, 2019, an increase of SEK 3.4 billion compared to year-end 2018.
This was mainly due to remeasurements of defined benefit pension
plans by SEK 3.6 billion. The increase is primarily an effect of lower
long-term interest rates in all countries.
Read more in Note 20 Provisions for post-­employment benefits.
On December 31, 2019 the total equity for the Volvo Group amounted
to SEK 141.7 billion compared to SEK 125.8 billion at year-end
2018. The equity ratio was 27.0% (26.5) on December 2019. On
the same date the equity ratio in the Industrial operations amounted
to 33.1% (31.9).
Financial POSITION
Net financial position
During 2019, net financial assets in the Volvo Group’s Industrial
Operations, excluding provisions for post-employment benefits and
lease liabilities increased by SEK 18.7 billion resulting in a net finan-
cial asset position of SEK 62.6 billion on December 31, 2019. The
change during the year was mainly explained by positive operating
cash flow of SEK 38.3 billion and the divestment of the majority of
the Volvo Group’s holding of shares in WirelessCar, by SEK 1.3 bil-
lion. The dividend to AB Volvo shareholders of SEK 20.3 billion had
a negative impact. Currency movements decreased the net financial
assets by SEK 0.6 billion.
Including provisions for post-employment benefits and lease lia-
bilities the Industrial Operations had net financial assets of SEK
37.3 billion. Applying the new lease accounting standard IFRS 16,
lease liabilities increased by SEK 6.1 billion in Industrial Operations
as of January 1, 2019 and thereby decreased net financial assets by
the same amount. Provisions for post-employment benefits
increased by SEK 3.4 billion during the year.

Read more in Note 3 Acquisitions and divestments of shares in subsidi-
aries, about the divestment of WirelessCar.
Read more in Note 20 Provisions for post-­employment benefits.
The Volvo Group´s cash and cash equivalents amounted to SEK
61.5 billion on December 31, 2019, an increase of SEK 14.5 billion
as an effect of the positive operating cash flow. In addition to this,
granted but unutilized credit facilities amounted to SEK 43.0 billion
(44.0). Cash and cash equivalents include SEK 2.4 billion (1.9) that
is not available to use by the Volvo Group and SEK 9.1 billion (5.6)
where other limitations exist, mainly in countries where exchange
controls or other legal restrictions apply. 
Read more in Note 18 Cash and cash equivalents.
Read more in Note 22 Liabilities, regarding the maturity structure on
Volvo Group’s credit facilities.
Net financial position, incl. provisions for post-employment
benefits and lease liabilities, Industrial O
­ perations, SEK bn
15 16 17 18 19
–13.2 –15.7 12.2 29.1 37.3
77
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 Financial POSITION

BALANCE SHEET VOLVO GROUP – ASSETS

Industrial Operations Financial Services Eliminations Volvo Group
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
SEK M 2019 2018 2019 2018 2019 2018 2019 2018

Assets      
Non-current assets    
Intangible assets Note 12 36,467 37,889 202 215 – – 36,668 38,104
Tangible assets Note 13
Property, plant and equipment   53,348 55,604 86 42 – – 53,433 55,646
Investment property 63 27 – – – – 63 27
Assets under operating leases   33,794 32,700 22,602 22,154 –13,070 –11,751 43,326 43,103
Financial assets
Investments in joint ventures
and ­associated companies Note 5 12,955 11,135 – – – – 12,955 11,135
Other shares and participations Note 5 139 731 19 9 – – 158 740
Non-current customer-financing
receivables Note 15 896 891 72,115 66,154 –1,127 –898 71,883 66,148
Net pension assets Note 20 1,663 1,549 – – – – 1,663 1,549
Non-current interest-bearing
­receivables Note 16 815 1,300 120 – –120 –5 815 1,296
Other non-current receivables Note 16 8,927 9,030 220 244 –703 –538 8,444 8,736
Deferred tax assets Note 10 12,261 12,506 979 999 1 – 13,242 13,505
Total non-current assets   161,327 163,363 96,342 89,817 –15,019 –13,191 242,650 239,989
Current assets
Inventories Note 17 56,080 65,366 564 417 – – 56,644 65,783
Current receivables  
Customer-financing receivables Note 15 675 669 71,299 60,860 –875 –750 71,099 60,779
Tax assets   1,287 1,326 511 343 – – 1,797 1,669
Interest-bearing receivables Note 16 4,102 2,581 345 1 –2,518 –485 1,929 2,097
Internal funding1   21,283 21,465 – – –21,283 –21,465 – –
Accounts receivables Note 16 35,827 40,376 1,896 1,530 – – 37,723 41,906
Other receivables Note 16 17,835 15,095 1,616 1,258 –889 –1,210 18,562 15,144
Marketable securities Note 18 200 160 0 – – – 200 160
Cash and cash equivalents Note 18 57,475 43,747 4,999 4,419 –1,014 –1,233 61,461 46,933
Assets held for sale Note 3 28,427 203 4,345 – – – 32,773 203
Total current assets   223,190 190,989 85,576 68,829 –26,578 –25,143 282,187 234,675
Total assets   384,517 354,351 181,917 158,646 –41,597 –38,334 524,837 474,663

1 Internal funding is internal lending from Industrial Operations to Financial Services.

78
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 Financial POSITION

BALANCE SHEET VOLVO GROUP – EQUITY AND LIABILITIES

Industrial Operations Financial Services Eliminations Volvo Group
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
SEK M 2019 2018 2019 2018 2019 2018 2019 2018

Equity and liabilities

Equity attributable to
owners of AB Volvo Note 19  124,067 110,692 14,533 12,687 –5 – 138,595 123,379
Non-controlling interest Note 11  3,083 2,452 – – – – 3,083 2,452
Total equity   127,150 113,144 14,533 12,687 –5 – 141,678 125,831
Non-current provisions
Provisions for post-­
employment benefits Note 20 19,850 16,374 138 108 – – 19,988 16,482
Provisions for deferred taxes Note 10 1,667 1,472 2,676 2,656 – – 4,343 4,128
Other provisions Note 21 13,965 13,991 220 278 401 321 14,585 14,590
Total non-current provisions   35,482 31,836 3,034 3,042 401 321 38,916 35,199
Non-current liabilities
Bond loans Note 22  65,754 59,115 – – – – 65,754 59,115
Other loans Note 22  19,871 13,411 16,956 15,638 –965 –954 35,862 28,095
Internal funding1   –60,635 –54,024 61,660 58,750 –1,025 –4,726 – –
Other liabilities Note 22  43,602 39,369 1,850 1,621 –9,141 –8,040 36,311 32,949
Total non-current liabilities   68,592 57,871 80,466 76,009 –11,131 –13,720 137,927 120,160
Current provisions Note 21 11,424 13,013 172 222 312 213 11,907 13,448
Current liabilities
Bond loans Note 22 31,759 26,657 – – – – 31,759 26,657
Other loans Note 22 12,675 12,950 14,567 11,154 –2,866 –2,114 24,377 21,989
Internal funding1   –37,098 –32,781 59,266 49,907 –22,169 –17,126 – –
Trade payables   66,590 72,683 276 947 – – 66,866 73,630
Tax liabilities   2,920 3,493 573 256 – – 3,493 3,749
Other liabilities Note 22 59,097 55,485 4,543 4,421 –6,139 –5,907 57,502 53,999
Liabilities held for sale Note 3 5,927 – 4,486 – – – 10,413 –
Total current liabilities   141,870 138,487 83,712 66,685 –31,174 –25,148 194,410 180,025
Total equity and liabilities   384,517 354,351 181,917 158,646 –41,597 –38,334 524,837 474,663

1 Internal funding is internal lending from Industrial Operations to Financial Services.

79
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 Financial POSITION

Net financial position excl. post-employment benefits and lease

liabilities Industrial Operations Volvo Group

SEK M Dec 31 2019 Dec 31 2018 Dec 31 2019 Dec 31 2018

Non-current interest-bearing assets

Non-current customer-financing receivables – – 71,883 66,148
Non-current interest-bearing receivables 815 1,300 815 1,296
Current interest-bearing assets
Customer-financing receivables – – 71,099 60,779
Interest-bearing receivables 4,102 2,581 1,929 2,097
Internal funding 21,283 21,465 – –
Marketable securities 200 160 200 160
Cash and cash equivalents 57,475 43,747 61,461 46,933
Assets held for sale – – 4,146 –
Total interest-bearing financial assets 83,874 69,254 211,533 177,413
Non-current interest-bearing liabilities
Bond loans –65,754 –59,115 –65,754 –59,115
Other loans –14,504 –13,411 –30,528 –28,095
Internal funding 60,635 54,024 – –
Current interest-bearing liabilities
Bond loans –31,759 –26,657 –31,759 –26,657
Other loans –10,899 –12,950 –22,621 –21,989
Internal funding 37,098 32,781 – –
Liabilities held for sale 3,906 – – –
Total interest-bearing financial liabilities excl. lease liabilities –21,278 –25,328 –150,662 –135,857
Net financial position excl. post-employment benefits and
lease liabilities 62,596 43,926 60,871 41,556

Provisions for post-employment benefits and lease liabilities, net Industrial Operations Volvo Group

SEK M Dec 31 2019 Dec 31 2018 Dec 31 2019 Dec 31 2018

Non-current lease liabilities –5,366 – –5,334 –

Current lease liabilities –1,776 – –1,755 –
Provisions for post-employment benefits, net –18,187 –14,825 –18,325 –14,933
Provisions for post-employment benefits and lease liabilities, net –25,329 –14,825 –25,414 –14,933

Net financial position incl. post-employment benefits and lease

liabilities Industrial Operations Volvo Group
SEK M Dec 31 2019 Dec 31 2018 Dec 31 2019 Dec 31 2018

Net financial position excl. post-employment benefits and lease liabilities 62,596 43,926 60,871 41,556
Provisions for post-employment benefits and lease liabilities, net –25,329 –14,825 –25,414 –14,933
Net financial position incl. post-employment benefits and
lease liabilities 37,267 29,101 35,457 26,623

80
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 Financial POSITION

Changes in net financial position, Industrial operations

SEK bn 2019 2018

Net financial position excl. post-employment benefits and lease liabilities at the end of previous period 43.9 26.3
Operating cash flow 38.3 26.6
Investments and divestments of shares, net 0.1 1.0
Acquired and divested operations, net 1.3 –0.2
Capital injections to/from Financial Services 1.3 0.3
Currency effect –0.6 –0.6
Dividend to owners of AB Volvo –20.3 –8.6
Dividend to non-controlling interest 0.0 0.0
Change in provision for post-employment benefits related to pension payments included in operating cash flow –2.6 –2.2
Other changes 1.2 1.3
Net financial position excl. post-employment benefits and lease liabilities at the end of period 62.6 43.9
Provisions for post-employment benefits and lease liabilities at the end of previous period –14.8 –14.1
Transition effect IFRS 16 –6.1 –
Provisions for post-employment benefits and lease liabilities after transition effect IFRS 16
at the beginning of period –20.9 –14.1
Pension payments, included in operating cash flow 2.6 2.2
Remeasurements of defined benefit pension plans –3.6 –0.5
Service costs and other pension costs –2.3 –1.9
Investments and amortizations of lease contracts 0.0 –
Currency effect –0.3 –0.6
Other changes –0.9 0.0
Provisions for post-employment benefits and lease liabilities at the end of period –25.3 –14.8
Net financial position incl. post-employment benefits and lease liabilities at the end of period 37.3 29.1

81
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
C A SH FLOW S TAT EMEN T
IMPROVED OPERATING CASH FLOW
D
uring 2019 operating cash flow in the Industrial
Operations amounted to SEK 38.3 billion (26.6).
The improved operating cash flow within
Industrial Operations is primarily related to the
improved operating income combined with an
unchanged level of working capital due to a
reduction of inventory levels, counterbalanced by a decrease in trade
payables. The decrease in trade payables is mainly an effect of a
reduction in production levels.
In 2018 other non-cash items were negativley impacted by a pro-
vision of SEK 7.0 billion related to estimated costs to address the
issue of an emission control component that may degrade more
quickly than expected, affecting the vehicles emission performance
negatively. The negative cash flow effects related to measures to
address the issue have started in 2019 and will gradually ramp up in
the coming years.
Income taxes paid in the Industrial Operations increased by SEK
2.1 billion compared to 2018.
Operating cash flow within Financial Services was negative in an
amount of SEK 14,0 billion (–10,4), mainly due to a growing credit
portfolio.
Read more in Note 10 Income taxes.
Read more in Note 21 Other provisions.
Investments and disposals
The Industrial Operations’ investments in tangible assets and capi-
talized research and development during 2019 amounted to SEK
11.9 billion (10.7).
Investments in Trucks in tangible assets and capitalized research
and development amounted to SEK 9.3 billion (7.7). The major
investments related to industrial efficiency measures in our plants
continued, with replacement of casting process equipment in
Skövde, Sweden. Replacements and upgrades in our US plants as
well as in Europe were also done. Capital expenditures were also
related to product renewals, the development of electric trucks,
emission upgrades with both product development activities and
required adaptations in the plants.
The investments in dealer networks and workshops were mainly
done in Europe primarily for upgrade and replacements.
Investments in Construction Equipment amounted to SEK 1.1
­billion (0.9). The major investments in the plants were mainly related
to product renewals, and industrial efficiency measures mainly in
Asia but also in Europe. The product related investments during the
year were mainly related to continued investments in tooling and
required adaptations in the plants for excavators.
82
Cash flow statement
The investments during the year were SEK 0.3 billion (0.4) in
Buses, and in Volvo Penta SEK 0.5 billion (0.6).
The investment level for property, plant and equipment during
2019 was above last year. During 2020, investments in property,
plant and equipment are expected to continue to increase compared
to 2019. Optimization of the industrial footprint, replacements,
dealer investments and product related tooling will continue to be
the main areas as well as real estate investments in Gothenburg,
Sweden.
Investments and divestments of all shares
During 2019 Volvo Group divested all shares in Terratech AB. The
total cash flow impact from the divestment amounted to SEK 0.3
billion. In total, investments and divestments of shares in 2019 had
a positive impact on cash flow of SEK 0.1 billion (1.0).
Read more in Note 5 Investments in joint venture, ­associated ­companies
and other shares and participations.
Acquired and divested operations
In total acquired and divested operations in 2019 had a positive
impact on cash flow of SEK 1.3 billion (–0.2), which was related to
the divestment of the majority of Volvo Group shares in WirelessCar.
Read more in Note 3 Acquisitions and divestments of shares in ­subsidiaries.
Financing and dividend
Net borrowings increased by SEK 9.3 billion during 2019 due to a
growing credit portfolio in Financial Services. In 2018 the corre-
sponding item increased by SEK 1.9 billion.
During the year a dividend of SEK 20.3 billion, corresponding to an
ordinary dividend of SEK 5.00 per share, and an extraordinary divi-
dend of SEK 5.00 per share was paid to the shareholders of AB Volvo.
Read more in Note 29 Cash flow regarding change in loans during 2019.
Change in cash and cash equivalents
The Volvo Group’s cash and cash equivalents increased by SEK 14.5
billion during the year due to the higher operating cash flow and
amounted to SEK 61.5 billion at December 31, 2019. 
Read more in Note 29 Cash flow regarding principles for preparing
the cash flow statement.
Read more in Note 18 Cash and cash equivalents ­regarding
the accounting policy.
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 Cash flow statement

CONSOLIDATED CASH FLOW STATEMENTS

Industrial Operations Financial Services Eliminations Volvo Group
SEK M 2019 2018 2019 2018 2019 2018 2019 2018

Operating activities  
Operating income  46,771 32,067 2,766 2,411 –6 – 49,531 34,478
Amortization intangible assets Note 12 2,911 2,988 51 36 0 – 2,963 3,024
Depreciation tangible assets Note 13 8,372 6,354 30 6 0 – 8,402 6,361
Depreciation leasing vehicles Note 13 4,514 4,448 4,707 4,606 0 0 9,221 9,054
Other non-cash items  Note 29 –3,5991 8,9402 1,033 754 –203 –32 –2,769 9,661
Total change in working capital whereof –486 –10,967 –18,039 –13,029 290 290 –18,235 –23,706
Change in accounts receivables 65 –2,455 –363 –456 0 0 –298 –2,911
Change in customer-financing receivables 36 –77 –16,951 –14,002 355 193 –16,560 –13,886
Change in inventories 4,964 –12,559 30 141 0 0 4,994 –12,419
Change in trade payables –2,643 5,384 –678 491 0 0 –3,322 5,875
Other changes in working capital  –2,907 –1,260 –78 797 –65 97 –3,050 –366
Interest and similar items received 794 631 2 – 18 13 814 644
Interest and similar items paid –1,177 –1,334 –8 – 81 27 –1,104 –1,307
Other financial items –371 –183 – – –3 – –374 –183
Income taxes paid –8,734 –6,593 –668 –245 0 0 –9,401 –6,838
Cash flow from operating activities 48,996 36,351 –10,127 –5,462 178 298 39,047 31,187
Investing activities
Investments in intangible assets –3,876 –3,682 –77 –63 – – –3,954 –3,746
Investments in tangible assets –8,059 –6,983 –4 –6 0 – –8,064 –6,989
Investment in leasing vehicles –102 –13 –9,890 –10,120 – – –9,991 –10,133
Disposals of in-/tangible assets and leasing vehicles  1,350 924 6,074 5,276 –6 – 7,418 6,201
Operating cash flow 38,309 26,597 –14,024 –10,376 172 298 24,455 16,520

Investments and divestments of shares, net Note 5, 29 92 970

Acquired and divested operations, net  Note 29       1,3431 –170
Interest-bearing receivables
incl marketable securities       –1,033 69
Cash flow after net investments       24,857 17,389
Financing activities      
Change in loans, net  Note 29       9,342 1,943
Dividend to shareholders of AB Volvo         –20,335 –8,636
Dividend to non-controlling interest –12 –6
Other         188 0
Change in cash and cash equivalents
excl. translation differences         14,040 10,691
Translation difference on cash and cash equivalents         487 150
Change in cash and cash equivalents         14,528 10,841
Cash and cash equivalents, beginning of year Note 18         46,933 36,092
Cash and cash equivalents, end of year Note 18         61,461 46,933

1 The gain on sale of WirelessCar of SEK 1.6 billion has been reclassified from other non-cash items to acquired and divested operations, net. The total cash flow impact
from the sale amounted to SEK 1.3 billion.
2 In 2018, other non-cash items was impacted by the provision of SEK 7 billion relating to estimated costs to address the issue of an emission control component that
may degrade more quickly than expected.

Operating cash flow, ­ Investments in property, plant and

Industrial Operations, SEK bn ­ quipment, Industrial Operations
e

Property, plant
and equipment,
SEK Bn
Property, plant
and equipment,
% of net sales
15 16 17 18 19 15 16 17 18 19
18.3 3.5 28.4 26.6 38.3 6.5 6.6 5.7 7.0 8.1
2.2 2.3 1.8 1.8 1.9

83
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 TRUCKS

TRUCKS

BOTH INCREASED SALES AND

IMPROVED PROFITABILITY

T
he truck business increased its sales by 11% to SEK IN BRIEF
276.6 billion on the back of continued good market
demand in many markets during the first half of
The truck operation’s p ­ roduct Share of Share of
2019, including Europe, North America and South Group sales net sales
offer stretches from heavy-
America. In the second half of the year, demand duty trucks for long-haulage
weakened in both Europe and North America. The and construc­­tion work to
adjusted operating income amounted to SEK 31,552 (26,351) M light-duty trucks for distri­ 64%
bution. The offering also
corresponding to a margin of 11.4% (10.5).
includes maintenance and
repair s­ ervices, financing Vehicles, 77%
Good first half, weaker second half in many markets and ­leasing. Services, 23%

Over the last couple of years there has been both fleet renewal and
fleet expansion in the European and North American truck markets. Position on Share of net sales by market, %
world market
This has increased the freight capacity, which during 2019 caught
Volvo Group is the world’s
up with transport demand. This could gradually be noticed in both second largest manufac­turer 41
31
lower freight rates and used vehicle prices. In the near term these of heavy-duty trucks. 13
markets are expected to be driven primarily by fleet renewals. Euro-
Number of 9
pean heavy-duty truck registrations are estimated to have been flat 5
regular ­employees
in 2019 while the North American heavy-duty truck market grew by 59,142 (58,891).
8%. Transport activity remained on a good level in both these mar-
kets, but customers held back on orders for new trucks to assure
fleet utilization in times of economic uncertainty.
In Brazil, the market growth continued and the increase in demand Net sales, Adjusted operating income1
was supported be the need for fleet renewal. The heavy-duty truck SEK bn and adjusted operating margin
market grew by 42%.
The truck market in India declined substantially, affected by tight
credit conditions for truck financing, lower economic activity in gen-
eral and lower investment sentiment.
15 16 17 18 19 15 16 17 18 19
The shift towards heavy-duty trucks in China continued. The heavy- 214.0 200.7 214.1 250.4 276.6 7.6 8.7 9.2 10.5 11.4 %
16,170 17,472 19,785 26,351 31.552 SEK M
duty truck market was up by 2%, while the medium-duty volumes
were down by 21% compared with 2018.
TRUCK BRANDS
In Japan, the heavy-duty truck market grew by 3%.

Orders and deliveries

Order intake to the Group’s wholly-owned truck operations decreased
by 27% to 182,746 (257,504) trucks. Order intake increased in South
America, but declined in all other regions, with a particularly big drop
in North America, which had extremely strong levels in 2018.
In 2019, a total of 232,769 trucks where delivered from the
Group’s wholly-owned operations, an increase of 3% compared with
226,490 trucks in 2018. Deliveries in Europe decreased, whereas
they increased in North America as the big order backlog from 2018
was delivered. Deliveries also increased in South America, while they
decreased in Asia as well as in Africa and Oceania.

1 For information on adjusted operating income,

please see Key Ratios on page 212.

84
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 TRUCKS

LIMITED EDITION
MACK
SPECIAL EDITION

BLACK
At the North American Com-
mercial Vehicle show in Atlanta
in October, Mack Trucks intro-

ANTHEM
duced the limited edition Mack
Black Anthem, a special run of
500 Mack Anthem models that
redefines what it means to
operate in the black. Featuring
a blacked-out exterior trim
package and additional interior
features, the Mack Black
Anthem gives customers the
opportunity to make a bold
statement while still realizing
the business benefits that come
from partnering with Mack.

85
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
Improved profitability
In 2019, net sales in the truck operations increased by 11% to SEK
276,647 (250,358). Adjusted for currency movements, net sales
increased by 5%, of which vehicle sales grew by 6% and service
sales by 3%.
In 2019, the adjusted operating income amounted to SEK 31,552
M (26,351) corresponding to a margin of 11.4% (10.5). There were
no adjustments in 2019. Adjusted operating income in 2018
excluded a provision of SEK 6,810 M relating to estimated costs to
address the issue of an emission control component. The improved
earnings were mainly a result of increased service sales, price reali-
zation and a positive customer mix, while increased R&D expenses
as well as selling expenses had a negative impact. Operating income
includes capital gains of SEK 707 M from divestments of real
estate. The reported operating income amounted to SEK 31,552 M
(19,541). Currency movements had a positive impact of SEK 2,203
M compared with 2018.
Important events
Volvo Trucks introduced Volvo FH with I-Save for customers in
Europe. By combining the new D13TC (turbo compound) engine
with updated fuel-saving features, this new solution can save fuel
costs by up to 7% in long-haul operations – without compromising
drivability.
The Volvo Group announced a four-year, SEK 1.6 billion invest-
ment in the plant in Skövde, Sweden to improve flexibility regarding
future products and materials in the foundry.
In the summer Renault Trucks handed over the first fully-electric
26-ton refuse truck to its customer Lyon Metropole. Volvo Trucks
handed over the first Volvo FL and Volvo FE trucks for city transport
and refuse operations to customers. In Q4, both Volvo Trucks and
Renault Trucks started selling electric trucks for urban transport
and refuse operations, meeting the increasing demand for sustaina-
ble transport solutions in city environments. In December, Volvo
Trucks presented heavy-duty electric concept trucks for construc-
RENAULT TRUCKS T HIGH 1894
LIMITED ANNIVERSARY EDITION
In 2019, Renault Trucks celebrated its 125 years of history with a
new limited edition, named the T High 1894 Edition. Combining a
modern style with allusions to the history of the brand, just 125 of
these vehicles were marketed in Europe. The French manufacturer
paid tribute to its roots with this truck, which features the colors of
the logo of Berliet, the origin of Renault Trucks.
86
TRUCKS
tion operations and regional transport. With these applications
Volvo Trucks will explore, demonstrate and evaluate different solu-
tions. Furthermore, the Mack LR battery electric refuse vehicle was
unveiled. Real world testing in the demanding operations of the
New York City Department of Sanitation will begin in 2020.
In September, Volvo Trucks North America, for the first time,
showed the Volvo VNR Electric truck for media and customers.
Limited commercial production will start in 2020 – with the first
deliveries being part of the partnership known as LIGHTS (Low
Impact Green Heavy Transport Solutions) between the Volvo Group,
California’s South Coast Air Quality Management District, and
industry leaders in transportation and electrical charging infrastruc-
ture.
Volvo Trucks announced the first assignment for Vera, its electric,
connected and autonomous vehicle. In a collaboration with the
logistics company DFDS, Vera will form part of an integrated solu-
tion to transport goods from a logistics center to a port terminal in
Gothenburg, Sweden.
Volvo Trucks announced the introduction of the successful Volvo
Dynamic Steering system in North America. The system is designed
to lessen steering force by up to 85%, helping reduce driver fatigue
and increase road safety. 
In December, it was announced that the Volvo Group and Isuzu
Motors have signed a non-binding Memorandum of Understanding
with the intent to form a strategic alliance within commercial
­vehicles by establishing a global technology partnership and trans­
ferring the ownership of the entire UD Trucks business globally from
the Volvo Group to Isuzu Motors. Signing of binding agreements is
expected by mid-2020 and closing of the transaction is expected by
the end of 2020.
In January 2020, Mack Trucks launched the all-new Mack MD
series of medium-duty trucks, adding to its already robust product
lineup to reach new customers and applications. Serial production
of the Mack MD Series will begin in July 2020. 
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 TRUCKS

STRONG POSITIONS GLOBALLY

Market shares, heavy-duty trucks, %

2018 2019

Europe 281
China
North America Japan
16.0

15.5

8.8

8.7

13.0

13.0
10.3

14.5
9.2

11.1
6.7

7.0

Volvo Renault
Volvo Mack Trucks Heavy Medium

18.0

18.5
Dongfeng
Trucks2
UD

Brazil
India

28.8
Australia
22.5

31.1
4.8
20.1

South Africa 4.7

Volvo Heavy Medium
Eicher2
1 The EU excluding the UK and Bulgaria and

14.9

17.6

8.2

3.5
3.7
7.9
including Norway and Switzerland. As of
21.8
17.6

November.
9.3
9.7

Volvo Mack UD
2 Volvo Group holds 45.6% in VECV, which
Volvo UD
produces Eicher trucks, and 45% in DFCV,
which produces Dongfeng trucks.

Net sales and operating income, Deliveries by market,

SEK M 2019 2018 Number of trucks 2019 2018

Europe 112,125 111,237 Europe 104,145 110,349

North America 85,731 70,233 North America 62,308 53,877
South America 23,753 16,021 South America 23,729 16,146
Asia 37,610 36,664 Asia 29,435 32,276
Africa and Oceania 17,427 16,203 Africa and Oceania 13,152 13,842
Total net sales 276,647 250,358 Total deliveries 232,769 226,490

Of which Heavy duty (>16 tons) 201,092 193,886

Vehicles 213,071 192,157 Medium duty (7–16 tons) 12,700 14,065
Services 63,575 58,201 Light duty (<7 tons) 18,977 18,539
Total deliveries 232,769 226,490
Adjusted operating income1 31,552 26,351
Adjustments 1
– –6,810 Volvo 131,254 127,466
Operating income 31,552 19,541 UD 19,911 20,636
Renault Trucks 54,098 54,868
Adjusted operating margin, % 11.4 10.5
Mack 27,506 23,520
Operating margin, % 11.4 7.8
Total deliveries 232,769 226,490
1 For information on adjusted operating income, please see Key Ratios
on page 212. Non-consolidated operations
VE Commercial Vehicles (Eicher) 47,083 63,210
Dongfeng Commercial Vehicle
Company (Dongfeng Trucks) 186,039 171,769

87
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 CONSTRUCTION EQUIPMENT

CONSTRUCTION EQUIPMENT

ANOTHER YEAR OF SOLID

PROFITABILITY

F
or Volvo Construction Equipment (Volvo CE) market IN BRIEF
demand was good in the first half of 2019, but lower
in the second half. Net sales increased by 5% to
Volvo CE is one of the lead- Share of Share of
SEK 88.6 billion and the adjusted operating income Group sales net sales
ers in the development of
rose to SEK 11,910 M (11,306). products and services for
Maintaining strong profitability and control of the construction, extraction,
waste processing, forestry 21%
cost across the business cycle lies at the heart of Volvo CE’s strat-
and materials handling sec-
egy. Key to this is driving growth and profitability for all product
tors.
lines and service offerings, with a special focus on excavators. The Construction
equipment, 86%
company is optimizing its presence, brand strategy, R&D, manufac- Position on world market Services, 14%
turing and distribution in China, securing customer success and One of the world’s leading
profit growth in this key market. It is also developing the dealer foot- manufacturers of haulers, Share of net sales by market, %
wheel loaders and excava-
print and capability to boost market share worldwide, particularly in
tors. Also produces road
the US. These measures help Volvo CE perform today, while helping construction machines and 34
20
to fund the development of new technologies within electro­mobility, compact equipment. The 38
autonomy and connectivity. Several advances were made in 2019, offering includes services
such as customer support
helping to transform Volvo CE and provide customers with new 3
5
agreements, machine con-
products and business models. trol systems, attachments,
financing and leasing. Number of regular e
­ mployees
Demand weakened after strong start 13,756 (13,419).
After several years of good growth, demand in 2019 started strongly
but lost momentum in the second half of the year. This was evi-
denced in all regions, with the exception of a continued growth in Net sales, Adjusted operating income1
China and a slowly recovering South America. Through November SEK bn and adjusted operating margin
2019, the European market was up by 6%, driven by continued
growth in Germany, Italy, France and Russia while the market in the
UK contracted. The North American market was 6% above the
same period in 2018 mainly due to an increase in demand for larger
15 16 17 18 19 15 16 17 18 19
machines. In South America the market was 17% up from histori- 51.0 50.7 66.3 84.2 88.6 4.1 4.4 11.9 13.4 13.4 %
2,090 2,246 7,917 11,306 11,910 SEK M
cally low levels driven by growth in Brazil, while Asia (excluding
China) declined by 11%. The Chinese market continued its positive
BRANDS
development and was up 8% with growth for both excavators and
wheel loaders.
Volvo CE’s order intake was flat, 83,953 machines (84,531).
Order intake decreased in all markets except China. Total deliveries
were up by 5% to 86,885 machines (82,654).
MACHINES
Stable sales and profitability
Net sales in 2019 rose by 5% to SEK 88,606 M (84,238). Adjusted
for currency movements, net sales were on the same level as 2018,
with machine sales being flat and service sales increasing by 1%.
Adjusted operating income amounted to SEK 11,910 M (11,306),
corresponding to a margin of 13.4% (13.4). There were no adjust-
ments in 2019. Adjusted operating income in 2018 excluded a cap-
ital gain of SEK 818 M. Somewhat higher sales and a favorable cur-
1 For information on adjusted operating
rency development had a positive impact whereas higher R&D income, please see Key Ratios on page 212.

88
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 CONSTRUCTION EQUIPMENT

TESTING

REMOTE-­
FIRST 5G NETWORK
FOR INDUSTRY

CONTROLLED In March, Telia, Ericsson and

Volvo Construction Equipment
launched Sweden’s first 5G
MACHINES network for industrial use at
Volvo CE’s facility in Eskilstuna.
Volvo CE became one of the
first in the world to use 5G
technology to test remote-­
controlled machines and auto­
nomous solutions.

89
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 CONSTRUCTION EQUIPMENT

Net sales and operating Deliveries by market,

income, SEK M 2019 2018 Number of machines 2019 2018

Europe 30,300 27,291 Europe 21,420 19,567

North America 17,404 15,575 North America 7,278 7,218
South America 2,532 2,304 South America 2,004 2,023
Asia 33,932 33,781 Asia 53,664 50,716
Africa and Oceania 4,437 5,287 Africa and Oceania 2,519 3,130
Total net sales 88,606 84,238 Total deliveries 86,885 82,654

Of which: Large and medium construction

Construction Equipment 76,506 72,797 equipment1 64,558 62,143
Services 12,099 11,441 Compact construction equipment 2 22,327 20,511
Total deliveries 86,885 82,654
Adjusted operating income¹ 11,910 11,306
Adjustments¹ – 818 Of which:
Operating income 11,910 12,125 Volvo 41,057 43,654
SDLG 45,682 38,768
Adjusted operating margin, % 13.4 13.4
Of which in China 40,202 33,851
Operating margin, % 13.4 14.4
1 Excavators >10 tons, wheel loaders engine power >120 hp, articulated
1 For information on adjusted operating income, please see Key Ratios haulers, rigid haulers and road machinery products.
on page 212.
2 E xcavators <10 tons, wheel loaders engine power <120 hp, skid steer
­loaders and backhoe loaders.

expenses and selling expenses impacted negatively. Reported
operating income amounted to SEK 11,910 M (12,125). Currency
movements had a positive impact on operating income of SEK
1.450 M compared with 2018.
Important events
Volvo CE and SDLG further extended their cooperation. In order to
accelerate growth in conjunction with the upcoming China IV emis-
sion standards, all excavators above 15 tons for the Chinese market
will be based on the latest Stage IV Volvo technology and branded
Volvo by December 2020.
Volvo CE launched its first fully electric machines, the L25 wheel
loader and the ECR25 compact excavator. Volvo CE also launched
hybrid machines (more on electrification below).
In October, Volvo CE signed a contract for the first commercial
pilot of the autonomous battery-electric load carrier together with
customer Harsco Environmental in Sweden – the next step towards
an industrialized solution.
A new mid-sized 20-ton excavator was also launched. It is suit­
able for construction, utilities and road infrastructure.
Swedish telecoms operator Telia installed its first 5G network for
industrial purposes at Volvo CE in Eskilstuna, Sweden (see previous
page).
Volvo CE acquired CeDe Group, an adaptor of construction and
mining machinery for special applications.
Energy savings took many forms during 2019, including Volvo CE
achieving its WWF energy-saving commitment of 40 GWh in its
factories – more than two years ahead of schedule. For more infor-
mation on WWF Climate Savers, please see page 35.
Praised for its ease of use and boost to safety, the machine control
system Volvo Active Control won two awards at the Car HMI 2019,
Europe’s leading automotive human-­ machine interface and user
experience event. 

VOLVO CE GOES ELECTRIC

Electrifying the future

Volvo CE’s commitment to a better tomorrow manifests itself in the strongest possi-
ble terms: by going electric. The launch of the EC25 Electric compact excavator and
L25 Electric compact wheel loader in 2019 is the forefront of the company’s long-
term shift to an electric future. In February 2020, Volvo CE started taking orders for
both electric compact wheel loaders and compact excavators and serial production is
planned for Q3 2020. Volvo CE also displayed the EC300E hydraulic-hybrid excavator,
whose simple hybrid solution provides a fuel-efficiency improvement of up to 17% and
12% lower CO2 emissions.

90
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 BUSES

BUSES

HIGHER DELIVERIES AND

IMPROVED PROFIT

H
igher deliveries contributed to Volvo Buses IN BRIEF
increasing its net sales by 20% to SEK 31.0 bil-
lion in 2019. The adjusted operating income
Volvo Buses is a leader in the Share of Share of
improved to SEK 1,337 M (765). development of sustainable Group sales net sales
Volvo Buses’ strategic priorities are to public transport solutions
enhance competitiveness and increase profita- and is one of the world’s
­largest manufacturers of 7%
bility by making both operational improvements and transforma-
­premium buses, coaches and
tional changes that further strengthen the commercial offering,
bus chassis. Volvo Buses has
improve quality and reduce cost. Transformational changes in 2019 sales in 85 countries and a
Vehicles, 83%
Services, 17%
included a simplified and more agile governance model, decentraliz- global service network with
ing decisions closer to customers and creating an organization more than 1,500 dealerships
Share of net sales by market, %
based on end-to-end business unit value chains rather than geogra- and workshops. Production
facilities are found in Europe,
phies. Consequently, to further strengthen the chassis business, North America, South
Volvo Buses created a dedicated global organization, Business Unit ­A merica and Asia. 24
50
Chassis, effective January 1, 2020. 8
Position on world market
Volvo Buses is one of the 11
7
Increased demand for electric buses
world’s largest producers
Global demand for heavy-duty buses remained high in 2019. The of buses and coaches in
European market stayed on a good level, with high tender volumes the premium segment. Number of regular e
­ mployees
in the Nordic region, but with a weak development in the UK. In 8,324 (8,178)
North America, demand continued to be good for transit buses,
whereas the coach market declined. The market in Brazil continued
to improve, while the Indian market was very weak. Net sales, Adjusted operating income1
SEK bn and adjusted operating margin
Deliveries of end-to-end solutions for electrified buses increased.
The product range includes hybrid chassis, a range of electrified
buses for Europe and Nova Bus hybrid and electric buses for North
America. The customer offering also includes battery and charging
infrastructure options as well as services. Charging solutions are
15 16 17 18 19 15 16 17 18 19
developed together with ABB and other providers, including end 23.6 25.4 25.9 25.8 31.0 3.6 3.4 3.4 3.0 4.3 %
stop fast-charging (OppCharge) and depot charging. 845 870 876 765 1,337 SEK M

During the year, Volvo Buses received an order for 157 electric
BRANDS
articulated buses to Gothenburg. In total, orders for 315 Volvo
branded fully electric buses were received. 438 electrified buses
were delivered to cities across Europe, confirming electric buses as
a sustainable and financially viable solution for high-capacity public
transport. More than 4,400 Volvo branded electrified buses have
been sold since the start in 2010. BUSES

Breakthrough orders
The offering includes city buses, inter-
Volvo Buses signed a contract for the delivery of up to 900 buses city buses and coaches as well as
over 10 years to the Public Transport Authority of Western Australia, associated transport systems,
Volvo’s largest chassis order to date in Australia. Volvo Buses was financial services and services
also awarded a frame agreement for 373 city buses to Dubai. This is for vehicle and traffic information.

Volvo’s largest chassis agreement to date in Dubai, and the largest

purchase of Euro VI city buses in the Middle East. Another signifi-
1 For information on adjusted operating income,
cant contract was a frame agreement of 168 units to Abu Dhabi. please see Key Ratios on page 212.

91
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 BUSES

New York State’s Metropolitan Transportation Authority ordered

330 Prevost commuter coaches, Prevost’s largest order in history.
Net sales and operating
income, SEK M 2019 2018
Higher sales and earnings
Buses’ net sales increased by 20% to SEK 31,019 M compared Europe 7,369 7,036
North America 15,543 13,244
with SEK 25,826 M in 2018. Adjusted for currency movements, net
South America 3,281 1,393
sales increased by 13%, of which vehicle sales increased by 15%,
Asia 2,617 2,094
driven by the volume increase and a high level of complete bus deliv-
Africa and Oceania 2,209 2,060
eries, and service sales by 6% as a consequence of increased
Total net sales 31,019 25,826
efforts in the service network expansion.
The adjusted operating income amounted to SEK 1,337 M (765), Of which:
corresponding to a margin of 4.3% (3.0). There were no adjust- Vehicles 25,600 20,943
ments in 2019. The adjustment in 2018 was SEK 190 M related to Services 5,419 4,883
an issue with an emission control component. Earnings were posi- Adjusted operating income¹ 1,337 765
tively impacted by increased volumes and improved market mix, Adjustments¹ – –190
whereas lower capacity utilization and higher selling and adminis- Operating income 1,337 575
trative expenses had a negative impact. Reported operating income
Adjusted operating margin, % 4.3 3.0
amounted to SEK 1,337 M (575). Changes in currency movements
Operating margin, % 4.3 2.2
had a positive impact in an amount of SEK 360 M.
1 For information on adjusted operating income, please see Key Ratios
on page 212.
Product and service introductions
Volvo Buses launched the new Volvo 7900 Electric Articulated bus,
available as a turnkey solution at a fixed, predetermined cost per
kilometer. The bus can carry up to 150 passengers with 80% lower
energy consumption than a corresponding diesel bus. At the Deliveries by market,
Busworld exhibition in Brussels, Volvo Buses received the Innova- Number of buses 2019 2018

tion Label Award for its electric driveline. Volvo’s full hybrid buses Europe 2,350 2,142
were upgraded to drive on electricity at higher speeds and for longer North America 3,084 2,796
distances. The Volvo 9900 premium coach was awarded both the South America 1,917 973
Busworld Safest Coach and the Busworld Best Coach All Categories. Asia 1,465 1,451
The Volvo 9900 also won the Red Dot Product Design Award. Africa and Oceania 915 1,064
Nanyang Technological University, Volvo Buses and the Land Trans- Total deliveries 9,731 8,426
port Authority of Singapore demonstrated a pioneering 12-meter fully
Non-consolidated operations
autonomous electric bus. Autonomous bus depot operations were
VE Commercial Vehicles (Eicher) 10,007 10,567
also demonstrated with customer Keolis in Gothenburg, Sweden.
Volvo Buses announced the launch of a new express double-decker
coach in early 2020, to supplement its latest 9000 range.   

CIRCULARIT Y

BUS BATTERIES REUSED

Reuse and recycling of batteries are key issues as an increasing number of cities
plan their transition to electrically-powered transport. Volvo Buses is partnering
with Stena Group to identify residual value of batteries for second life. The program
involves 30 battery modules from Volvo buses as units in an energy storage ware-
house, storing solar energy for 200 apartments in Gothenburg, Sweden. This use of
batteries gives them an extended service life, which means better resource utiliza-
tion and less environmental impact. It also improves the efficiency of the housing
community’s own energy system as well as that of the city’s power grid.

92
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 VOLVO PENTA

VO LVO P EN TA

STABLE SALES BUT

LOWER PROFITABILITY

I
n 2019, Volvo Penta’s net sales of SEK 13.3 billion were on IN BRIEF
the same level as in the previous year. The adjusted operat-
ing income declined to SEK 1,876 M (2,341).
Volvo Penta aims to be the Share of Share of
Volvo Penta operates in two businesses: Marine (leisure Group sales net sales
most forward thinking and
and commercial) and Industrial (off-road and power genera- customer focused supplier of
tion). In the marine segments, Volvo Penta aims to lead the sustainable power solutions.
Volvo Penta provides engines 3%
industry, continuing to develop innovative products and solutions. In
and power solutions for lei-
the Industrial segments, Volvo Penta aims to be a key player, contin-
sure and commercial boats,
uing to expand its strong footprint, seeking maximum leverage of as well as for power genera-
Engines, 73%
Services, 27%
Volvo Group assets, such as the engine portfolio, in its offer, and add- tion and industrial, off-road
ing value for customers in its application and integration expertise. applications.
Share of net sales by market, %
Volvo Penta’s strategy is to grow profitably and deliver an excellent
Position on world market
customer experience. The company aims to continue to perform with
Volvo Penta is the world’s
its existing product offer in order to be able to transform and embrace 50
largest producer of power 24
new technologies and business opportunities, such as electromobil- systems for leisure boats and 18

ity and a new range of services. a leading provider of power

3
systems for industrial off- 5
road and power generation
Market development and engine shipments segments.
During 2019, parts of the marine leisure market softened. However, Number of regular e
­ mployees
there was still growth in large yachts, which is a segment where 1,800 (1,713).
Volvo Penta continued to gain market share. There was a positive
development in the marine commercial market, especially within
off-shore energy. Interest for electrified solutions continued for seg- Net sales, Adjusted operating income1
ments such as people transportation within urban areas. SEK bn and adjusted operating margin
The market for industrial off-road engines slowed down due to a
decline in construction and agriculture machinery segments. Within
agricultural machinery, the effects were seen especially in emerging
markets, but also in Europe. Global construction equipment sales
showed a slowing trend, but there was growth in Asian and Ameri- 15 16 17 18 19 15 16 17 18 19
9.4 9.8 11.1 13.7 13.3 11.7 12.8 12.9 17.0 14.1 %
can markets. In Europe, the slowdown was further accentuated by 1,102 1,269 1,439 2,341 1,876 SEK M

the Stage V-related pre-buy in Europe in 2018. Demand for indus-

trial power generation engines also declined slightly, counterbal- BRANDS
anced by growth in the data center back-up business, especially in
North America.
In total, Volvo Penta engine deliveries decreased by 19% to
39,459 units (48,505) as a consequence of high deliveries in 2018
ENGINES
in connection with the pre-buy of industrial engines in Europe.

Lower profitability
Volvo Penta’s net sales decreased by 3% to SEK 13,287 M com-
pared with SEK 13,741 M in 2018. Adjusted for currency move-
ments, net sales decreased by 7%, of which engine sales decreased Marine engines Industrial engines

by 11%, and service sales grew by 3%.

Both the adjusted and reported operating income amounted to
1 For information on adjusted operating
SEK 1,876 M (2,341), corresponding to a margin of 14.1% (17.0). income, please see Key Ratios on page 212.

93
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 VOLVO PENTA

Net sales and operating Deliveries by segment,

income, SEK M 2019 2018 Number of units 2019 2018

Europe 6,671 7,487 Marine engines1 18,135 20,006

North America 3,180 2,912 Industrial engines 21,324 28,499
South America 319 299 Total deliveries 39,459 48,505
Asia 2,439 2,443 1 Excluding outboard engines.
Africa and Oceania 679 599
Total net sales 13,287 13,741

Of which:
Engines 9,698 10,410 Additionally, Volvo Penta launched its new generation of D4/D6
Services 3,588 3,330 propulsion packages for marine applications, see below.
Designed to meet upcoming IMO III emissions legislation, a new
Adjusted operating income1 1,876 2,341
D8 package for marine heavy-duty and genset applications was also
Adjustments¹ – –
showcased for the first time during 2019.
Operating income 1,876 2,341

Adjusted operating margin, % 14.1 17.0
Operating margin, % 14.1 17.0
1 For information on adjusted operating income, please see Key Ratios
on page 212.
Earnings were positively impacted by a favorable product and seg-
ment mix and negatively by lower volumes, higher R&D expenses
and increased selling expenses. Changes in currency movements
had a positive impact in an amount of SEK 226 M.
Further strengthened customer offer
During 2019, Volvo Penta rolled out a complete power generation
engine range to meet European Stage V emission legislation. The
new range includes D16, D13, and D8 engines – developed with
ease of installation, operation and maintenance in mind.
Electrified solutions and marine automation and connectivity
During 2019, important steps were taken in the company’s journey
to offer electrified power solutions to both industrial and marine
segments (see page 23).
Volvo Penta also took its next steps in marine automation con-
cepts, announcing its work with assisted maneuvering. Since the
live demo of its self-docking technology in 2018, Volvo Penta
received input from a wide range of stakeholders. As a result, the
company will take a step-wise approach starting with automated
functionality to make tricky maneuvering even easier.
The company also continued to evolve its Easy Connect app during
2019, which provides users with data related to the engine, boat, and
routes taken – directly to their smartphone or tablet. The app was
expanded to include a connection to the cloud, as well as increased
languages and user support (see page 30). 

D4 AND D6 PROPULSION PACKAGES

NEW GENERATION
MARINE ENGINES
With over 100,000 units produced, the Volvo Penta D4 and D6
got a comprehensive update based on customer feedback and
with the target to deliver an even better boating experience, as
well as more power and reliability, while operating costs are cut
by a third. The updates include newly designed engines, a com-
pletely new Aquamatic sterndrive, an updated IPS drive and an
upgraded Electronic Vessel Control System. From the outside the
changes might not be that obvious, but almost every aspect of the
fully integrated system has been upgraded, from helm-to-prop.
The enhancements include re-engineering of the engines, deliver-
ing more power and torque and ensuring the highest levels of relia-
bility. They are perfectly matched with an upgraded IPS pod and
the new DPI Aquamatic sterndrive, which bring increased comfort
and maneuverability, as well as more straightforward servicing and
maintenance.

94
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 FINANCIAL SERVICES

FINANCIAL SERVICES

GOOD PROFITABILITY, VOLUME

AND PORTFOLIO GROWTH

V
olvo Financial Services (VFS) finished 2019 with IN BRIEF
an increased operating income of SEK 2,766 M
(2,411), record new business volume of SEK 81.0
Volvo Financial Services Distribution of credit portfolio, %
billion (69.7), and continued profitable portfolio
(VFS) offers competitive
growth. Return on equity remained strong at financial solutions which
15.0%. strengthen long-term rela-
VFS’ financial solutions support the sales of Group vehicles and tionships with Volvo Group
customers and dealers. As
equipment, and are available with other services such as repair and
the number one provider of Volvo Trucks, 50 (49)
maintenance contracts, insurance, etc. at the point-of-sale through financial solutions for Volvo Volvo CE, 22 (23)
Volvo Group dealers. This integrated approach delivers a convenient Group products, VFS deliv- Renault Trucks, 9 (10)
one stop-shopping experience for customers. ers value to customers and Mack Trucks, 12 (12)
builds loyalty to the Volvo Buses, 4 (4)
Group brands through ease UD Trucks, 3 (2)
Perform and transform
of doing business, speed to
The foundation of VFS is the mission to be the best finance company market, and knowledge and Number of regular e
­ mployees
in the industry and to enable the Volvo Group to sell more products expertise of the industry. 1,538 (1,401).
and services. The foundation is depicted in VFS’ plans which drive
three aspirations: Be the Provider of Choice and Employer of Choice in Position on world market
the industry, and Deliver Shareholder Value. In 2019, VFS leveraged VFS has customer financing activities available in 48 countries in
the world. VFS manages a credit portfolio of SEK 170 billion with
the foundation to increase performance in the traditional asset-based
more than 200,000 vehicles and equipment.
business, while driving the digital transformation of VFS products and
services to increase speed, convenience and competitiveness. This
strategic focus, enabled VFS to further enhance its products and ser-
Operating income, SEK M Return on shareholders’ equity1, %
vices in ways that increased value for customers, while leveraging
innovation and digitalization in order to take the overall customer
experience to the next level.

Business performance remained strong 15 16 17 18 19 15 16 17 18 19

The business environment in 2019 was characterized by some slow- 2,006 2,086 2,192 2,411 2,766 13.4 13.7 14.3 15.1 15.0

down from historically high levels, heightened competition and mar-

ket liquidity, fluctuating interest rates and uncertainties regarding
tariffs, sanctions and geo-political stability. Amidst these challenges
and a declining industry growth rate, VFS achieved an improved over-
all penetration rate of 25% (24) for the year, while also continuing to
increase its customer satisfaction ratings and securing the #1 posi-
tion in market share in the majority of markets that VFS serves.
Entering new markets, where financing can mean the difference
between buying from the Volvo Group or the competition, remained
a continued important growth area for VFS. In 2019, VFS opened
operations in South Korea while preparing for operations to begin in
Peru and Croatia in 2020, and are committed to developing digital
services as appropriate to grow in these markets.
Continuing to develop its employment brand, VFS received addi-
tional Great Place to Work® certifications in Mexico, Spain and
Chile, while increasing employee development and mobility pro-
grams, and implementing additional health and wellbeing practices
to maintain high employee engagement levels.
1 Excluding a positive impact of SEK 897 M during 2017 from the
­revaluation of deferred tax liabilities related to a tax reform in the US.­
VFS credit portfolio and profitability continued to grow, with
record levels of new business volume and operating income, and
high return on equity. Cost control, operating leverage, pricing dis-
cipline and risk control contributed to this performance, along with
a disciplined approach to new investments and capital markets exe-
cution. Historically low levels of overdues and credit losses were
maintained in most markets. North America, Brazil and most of
Europe continued to produce good profitability and commercial
results. In addition, Asia Pacicifc continued to produce good volume
and penetration amidst slowing economic growth
Financial results improved
During 2019, VFS continued to grow the credit portfolio and
improve earnings. New business volume increased due to higher
deliveries of Group products and improved penetration levels. Total

95
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 FINANCIAL SERVICES

Penetration rate1, % Key ratios, financial s

­ ervices 2019 2018

Number of financed units 62,209 58,698

Total penetration rate1, % 25 24
New financing volume, SEK billion 81.0 69.7
Credit portfolio net, SEK billion 170 149
Credit provision expenses, SEK M 729 538
Volvo Volvo Mack Buses Renault UD Operating income, SEK M 2,766 2,411
CE Trucks Trucks Trucks Trucks
36 34 28 30 20 21 16 19 17 17 11 13
Credit reserves, % of credit
portfolio 1.51 1.63
2018 2019 Return on shareholders’ equity, % 15.0 15.1

1 Share of unit sales financed by Volvo Financial Services in relation 1 Share of unit sales financed by Volvo Financial Services in relation to
to total ­number of units sold by the Volvo Group in markets where the total number of units sold by the Volvo Group in markets where
­f inancial services are offered. financial services are offered.

new financing volume in 2019 amounted to SEK 81.0 billion (69.7),

an increase of 11% compared to 2018, adjusted for currency. In
Income statement ­financial
total, 62,209 new Volvo Group vehicles and machines (58,698) services, SEK M 2019 2018
were financed during the year. In the markets where financing is
offered, the average penetration rate was 25% (24). Finance and lease income 14,870 13,070
The net credit portfolio of SEK 169,893 M (148,856) increased Finance and lease expenses 9,091 –7,924
by 10% on a currency-adjusted basis compared to 2018. The fund- Gross income 5,779 5,146

ing of the credit portfolio is matched in terms of maturity, interest Selling and administrative
rates and currencies in accordance with Group policy. For further expenses –2,568 –2,290
information, see Note 4. Credit provision expenses –729 –538
Operating income amounted to SEK 2,766 M (2,411) and the return Other operating income and
expenses 284 93
on shareholders’ equity was 15.0% (15.1). The equity ratio at the end
Operating income 2,766 2,411
of the year was 8.0% (8.0). Profitable portfolio growth coupled with
efficiency gains were the primary drivers of the increase in earnings. Income taxes –688 –613
During the year, credit provision expenses amounted to SEK 729 Income for the period 2,079 1,798
M (538) while write-offs of SEK 574 M (319) were recorded. The Return on shareholders’ equity, % 15.0 15.1
writeoff ratio for 2019 was 0.35% (0.22). At the end of December
31, 2019, credit reserves were 1.51% (1.63) of the credit portfolio. 

SHOWCASED INNOVATIONS

Financial Services
for the Future
iLABX by VFS held its inaugural iLABX Demo Day in 2019, when
seven selected startup companies from around the world show-
cased innovative solutions leveraging mobility, blockchain, artificial
intelligence, and insurance technology. The event resulted in sev-
eral strategic partnerships for VFS, to drive change and speed to
market in financial services for customers.

96
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 FINANCIAL MANAGEMENT

FINANCIAL MANAGEMENT

STRONG FINANCIAL POSITION AND

IMPROVED CREDIT RATING

T
he objectives of the financial management in the
Volvo Group is to assure shareholders long-term Volvo Group liquidity position, December 31, 2019
attractive total return and debt providers the finan-
cial strength and flexibility to secure proceeds and SEK bn
120
repayment. 104.5
A long-term competitive business requires access 100
80 43.0
to capital to be able to invest. Financial management ensures that
the capital is used in the best possible way through well-defined 60

ratios and objectives for the Industrial Operations as well as for the 40
61.5
customer finance operations in Financial Services. The objective on 20
Group operating margin and return on equity for Financial Services 0
are intended to secure the return requirements from shareholders. Cash and cash Revolving credit
equivalents facilities
The target on no net financial indebtedness under normal circum-
stances the Industrial Operations and the equity ratio for Financial
Services are there to secure fi­­nancial stability for debt providers.

Geographically diversified market programs

Steering principles to ensure financial flexibility
over the business cycle
To ensure financial stability and flexibility throughout the business CAD SEK
CNY
cycle the Volvo Group holds a strong liquidity position. Besides cash USD EUR JPY
and marketable securities the liquidity position is built up of com-
INR
mitted credit facilities. Funding and lending in Financial Services CNH

are in local currency and the portfolio is matched both from an inter-
est and a liquidity risk perspective, in accordance with the Volvo BRL AUD
Group policy. For further information, please see Note 4 to the
­C onsolidated financial statements.

Diversified funding sources give flexibility and

support the global presence
Credit rating, February 24, 2020
The Volvo Group has centralized the portfolio man­­agement of all
Short-term Long-term
financial assets and liabilities, funding operations and cash manage-
ment through the internal bank, Volvo Treasury. The liability port­ Moody’s (Corporate Rating) P-2 A3, stable
folio is separated into two portfolios, one for Industrial Operations S&P (Corporate Rating) A2 A-, stable
R&I (Japan) a-1 A+, stable
and one for Financial Services, to correspond to the needs of the
different operations.
Volvo Treasury is increasing the possibility to access capital mar-
kets at all times through diversified funding sources. Furthermore,
the Volvo Group’s global presence is supported by bond programs
on all major debt capital markets in the world. Besides the access to debt investors but also for a number of other stakeholders when it
capital markets around the world, the Volvo Group uses different comes to creating long-term relationships. A strong credit rating
instruments, such as bilateral bank funding, corpor­ate bonds and has a positive effect on the ­ability to attract and finance customers’
certificates, hybrid bonds, agency funding as well as securitization purchases of the Group’s products and on the trust from suppliers.
of assets in Financial Services’ credit portfolio. An increasingly It also gives access to more funding sources and lower cost of
import­ant part of the treasury work is also to manage increased funds.
funding needs in new growth markets for the Group. The Volvo Group has contractual relations with two global Credit
Rating Agencies for solicited credit ratings: Moody’s Investors
A strong and stable credit rating is important ­Service (Moody’s) and Standard & Poors’ ­Rating Services (S&P). In
Being a large issuer of bonds, it is critical to have a strong and stable 2019, Moody’s raised its rating from Baa1 to A3 with a stable out-
credit rating. The level of the credit rating is not only important for look. S&P raised its rating from BBB+ to A- with a stable outlook. 

97
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 CHANGES IN CONSOLIDATED TOTAL EQUIT Y

CH A NGES IN C ONSOL IDAT ED EQ UI T Y

Equity attributable to owners of AB Volvo

Non-
Share Other Translation Retained controlling Total
SEK M capital reserves 1 reserve earnings Total interest equity

Balance at December 31, 2017 2,554 240 2,010 101,056 105,861 1,941 107,802
Transition effect IFRS 9 – – – –371 –371 – –371
Adjusted opening balance at January 1, 2018 2,554 240 2,010 100,685 105,490 1,941 107,431
Income for the period – – – 24,897 24,897 466 25,363
Other comprehensive income
Remeasurements of defined benefit plans  Note 20 – – – –579 –579 – –579
Remeasurements of holding of shares at fair
value  Note 5, 19 – 14 – – 14 – 14
Exchange differences on translation of foreign
­operations – – 2,298 – 2,298 52 2,350
Share of Other comprehensive income related to
joint ventures and associated companies – – – – – – –
Accumulated translation differences
reversed to income – – –94 – –94 – –94
Other comprehensive income for the period – 14 2,204 –579 1,639 52 1,691
Total comprehensive income for the period – 14 2,204 24,318 26,536 518 27,054
Transactions with shareholders
Dividends to AB Volvo’s shareholders – – – –8,636 –8,636 –6 –8,641
Transactions with non-controlling interests – – – – – – –
Share based payments  Note 27 – – – 24 24 – 24
Changes in non-controlling interests – – – – – – –
Other changes – – – –35 –35 –2 –37
Transactions with shareholders – – – –8,647 –8,647 –7 –8,654

Balance at December 31, 2018 2,554 254 4,214 116,356 123,379 2,452 125,831
Income for the period – – – 35,861 35,861 635 36,495
Other comprehensive income
Remeasurements of defined benefit plans Note 20 – – – –2,969 –2,969 – –2,969
Remeasurements of holding of shares at fair
value Note 5, 19 – 10 – – 10 – 10
Exchange differences on translation of foreign
­operations – – 2,586 – 2,586 30 2,616
Share of Other comprehensive income related to
joint ventures and associated companies – – – 252 252 – 252
Accumulated translation differences
reversed to income – – – – – – –
Other comprehensive income for the period – 10 2,586 –2,717 –121 30 –91
Total comprehensive income for the period – 10 2,586 33,143 35,738 665 36,403
Transactions with shareholders
Dividends to AB Volvo’s shareholders – – – –20,335 –20,335 –12 –20,347
Transactions with non-controlling interests – – – – – – –
Share based payments Note 27 – – – –46 –46 – –46
Changes in non-controlling interests – – – – – – –
Other changes – -28 – –114 –142 –21 –163
Transactions with shareholders – –28 – –20,495 –20,523 –33 –20,556
Balance at December 31, 2019 2,554 236 6,800 129,004 138,595 3,083 141,678

1  Read more in Note 19 Equity and number of shares regarding specification of other reserves.

98
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 THE SHARE

THE SHARE

SHARE PRICE INCREASE IN 2019

M
ost of the world’s leading stock markets had
a positive development during 2019. The
Why invest in the Volvo share?
price of the Volvo B increased by 35% after
having decreased by 24% in 2018. • Competitive products and services
The Volvo share is listed on the stock • Strong market positions globally
exchange ­Nasdaq Stockholm, Sweden. One A • Improved profitability and cash flow in recent years
share carries one vote at General Meetings and one B share carries one
• Strong financial position
tenth of a vote. Dividends are the same for both classes of shares. The
• Good cash returns to shareholders
Volvo share is included in a large number of indices that are compiled
by Dow Jones, FTSE, S&P and Nasdaq Nordic.

The Volvo share price increased

In general, the leading stock exchanges rose during 2019. On
­Nasdaq Stockholm, the broad OMXSPI index rose by 30% com- Earnings and dividend per share, dividend yield
pared to a decline of 8% in 2018. 1 Ordinary dividend
On Nasdaq Stockholm the share price for the Volvo A share rose by SEK 5.00 and extra
dividend SEK 5.00.
36%, and at year-end the price was SEK 158.20 (116.20). The low-
2 P roposed by the
est closing price was SEK 113.90 on January 3 and the highest clos- Board of Directors.
ing price was SEK 160.10 on December 27. The share price for the Ordinary dividend
Volvo B share rose by 35% and at year-end the price was SEK 15 16 17 18 19 of SEK 5.50 and
an extra dividend
156.90 (115.95). The lowest closing price was SEK 113.85 on Janu- 7.41 6.47 10.07 12.24 17.64 of SEK 7.50.
ary 3 and the highest closing price was SEK 160.05 on December 27. 3.00 3.25 4.25 10.001 13.002
In 2019, a total of 1.2 billion (1.3) Volvo shares at a value of SEK 3.8 3.1 2.8 8.7 8.3

167 billion (198) were traded on Nasdaq Stockholm, corresponding
to a daily average of 4.8 million shares (5.4). The Volvo share was the
second most traded share on Nasdaq Stockholm in 2019. At year-
end, Volvo’s market capitalization totalled SEK 335 billion (247).
According to Fidessa, Nasdaq Stockholm accounted for 41% (41) of
all the trading in the Volvo B share. CBOE Global Markets accounted for
40% (42) and LSE Group for 13% (5). The remainder of the trading
took place on a large number of trading venues.
Share conversion option
In accordance with a resolution at the Annual General Meeting on
April 6, 2011, the Articles of Association have been amended to
include a conversion clause, stipulating that series A shares may be
converted into series B shares, after a request sent to the Board.
During 2019, a total of 1,193,358 A shares were converted to B
shares, representing approximately 0.25 % of the A shares
that were outstanding at the end of 2018. Further information
on the procedure is available on the Volvo Group’s web site:
­­w ww.­volvogroup.com
Dividend
The Board proposes an ordinary dividend of SEK 5.50 per share for
the financial year 2019 and an extra dividend of SEK 7.50 per share,
which would mean that a total of SEK 26,435 M would be trans-
ferred to AB Volvo’s shareholders. For the preceding year a ­dividend
of SEK 5.00 per share and an extra dividend of SEK 5.00 per share
were paid out, in total SEK 20,335 M.
Communication with shareholders
Dialogue with the shareholders is important for Volvo. In addition to
the Annual General Meeting and a number of larger activities aimed
at professional investors, private shareholders and stock market
analysts, the relationship between Volvo and the stock market is
maintained through such events as press and telephone confer-
Diluted earnings Dividend Dividend
per share, SEK per share, SEK yield, %
ences in conjunction with the publication of interim reports, meet-
ings with retail shareholders’ associations, investor meetings and
visits, as well as road shows in Europe and North America.
On volvogroup.com it is possible to access financial reports, GRI
reports and search for information concerning the share and statis-
tics for truck deliveries. It is also possible to access information con-
cerning the Group’s governance, including information about the
Annual ­General Meeting, the Board of Directors, Group Manage-
ment and other areas that are regulated in the “Swedish Code of
Corporate Governance.” The website also offers the possibility to
subscribe to information from the company.
Volvo has elected to present its Corporate Governance Report as
a separate document to the Annual Report in accordance with
Chapter 6 § 8 of the Swedish Annual Accounts Act and it is available
on pages 188–205 of this Annual and Sustainability Report. 
Contractual conditions related to takeover bids
Provisions stipulating that an agreement can be changed or termi-
nated if the control of the company is changed, so called change of
control clauses, are included in some of the agreements whereby
Renault Trucks has been given the right to sell Renault s.a.s. and
Nissan Motor Co. Ltd’s light-duty trucks as well as in some of the
Group’s purchasing agreements.
Some of Volvo Group’s long-term loan agreements contain condi-
tions stipulating the right for a bondholder to request repayment in
advance under certain conditions following a change of the control of
the company. These clauses are not unusual in loan agreements. In
AB Volvo’s opinion it has been necessary to accept those conditions
in order to receive financing on otherwise acceptable terms. 

99
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 THE SHARE

Price trend, Volvo Series B share, 2015–2019, SEK The shareholders with the
largest voting rights in AB Volvo,
180 December 31, 20191
Voting Capital,
160 rights, % %

Industrivärden 25.2 7.8

140
Geely Holding 15.7 8.2
AMF Insurance &
120
Funds 5.3 3.5
Alecta 5.0 4.4
100
Norges Bank Invest-
ment Management 4.1 1.6
80
Source:
Investis Digital 1 Adjusted for shares owned by AB Volvo,
which carry no voting rights at General
60 15 16 17 18 19 Meetings. AB Volvo held 20,728,135 class A
shares and 74,257,751 class B shares com-
Volvo B OMX Stockholm PI Index OMX Stockholm Industrial Goods & Services prising in total 4.5% of the number of regis-
tered shares on December 31, 2019.

Share capital, December 31, 2019

Registered number
Price trend, Volvo Series B share, 2019, SEK
of shares1 2,128,420,220
of which,
170 Series A shares2 476,912,471
160 of which,
Series B shares3 1,651,507,749
150
Share capital, SEK M 2,554
140
Number of shareholders 250,798
130 Private persons 237,422
120 Legal entities 13,376

110 For further details on the Volvo share, see Note 19.
Source: Investis Digital
1 The number of outstanding shares was
100 Q1 Q2 Q3 Q4 2,033,452,084 on December 31, 2019.

OMX Stockholm PI Index 2 Series A shares carry one vote each.

Volvo B OMX Stockholm Industrial Goods & Services
3 Series B shares carry one tenth of a vote each.

Ownership by country 1 Ownership by categories1 More details on

the Volvo share and
Sweden 65% Non-Swedish owners 35% Volvo’s holding of
The US 16% Other Swedish institutions 40% treasury shares are
The UK 8% Swedish mutual funds 15% provided in Note 19
Luxembourg 3% Swedish private shareholders 10% to the financial
Belgium 3% statements and in
Finland 1% the Eleven-year
Others 4%
summary.

1 Share of capital, registered shares. 1 Share of capital, registered shares.

Source: Euroclear The employees’ ownership of shares in Volvo through

pension foundations is insignificant.

Source: Euroclear

100
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 THE SHARE

Volvo Group has been independently assessed according to the FTSE4Good criteria, and has satisfied
the requirements to become a constituent of the FTSE4Good Index Series. Companies in the FTSE-
4Good Index Series have met stringent environmental, social and governance criteria, and are posi-
tioned to capitalise on the benefits of responsible ­business practice.

Shareholder value – Long-term value creation SEK 1,000 invested in Volvo B shares on January 2, 1987,
was worth SEK 47,380 at the end of 2019.
The Volvo Group strives to create long-term value for its
shareholders.
SEK 1,000
The Volvo Group’s origins can be traced to 1927, when
the first serial produced Volvo car rolled out of the factory in
­Göteborg, Sweden. The first serial produced truck saw the 1987
light of day in 1928 and was an immediate success. In 1935, SEK 47,380
AB Volvo was listed on the Stockholm Stock Exchange.
The graph shows the total return for the Volvo B share,
­measured as the share price development with all dividends
­re-­invested, since January 02, 1987.
The graph shows that SEK 1,000 invested in the Volvo 2019
B-share in 1987 had grown to SEK 47,380 at the end of 2019,
under the condition that all dividends have been reinvested in
Volvo B shares.

Accumulated total return of the Volvo B share

5,000
+4,638%

4,000

3,000

2,000

1,000

0
1987 1990 1995 2000 2005 2010 2015 2019

Volvo B Total return (including reinvested dividends) SIX Return Index (including reinvested dividends) Source: Investis Digital

101
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 RISKS AND UNCERTAINTIES

RISK S A ND UNCER TA IN T IES

MANAGED RISK-TAKING
Each of the Volvo Group’s Business Areas monitors and manages tematic and structured framework for reporting and analyzing risk
risks in its operations. In addition, the Volvo Group utilizes a central- assessments and mitigations as well as for following up on identi-
ized Enterprise Risk Management (ERM) process, which is a sys- fied risks.

Enterprise Risk Management Process

For the governance
model of the
The Board of Directors monitors risks and mitiga- Volvo Group,
tion activities annually and the Audit Committee please see page 189.
Board of Directors biannually through the consolidated ERM report.
Audit Committee

The Executive Board analyzes accuracy of reported risks

and mitigation activities, and ensures alignment to strate-
Executive Board gic and operational agenda.

The ERM Committee reviews, analyzes and challenges com-

piled risks and mitigation activities three times per year. The
Enterprise Risk committee consists of the Executive Vice President Group
Management Committee Finance, Executive Vice President Legal & Compliance, Sen-
ior Vice President Group Treasury & Corporate Finance and
Senior Vice President Group Reporting, Tax and Control.

Each Business Area and Group Truck Division reports its

largest risks and mitigation activities three times per year
Enterprise Risk to the ERM function, which analyzes and compiles
Management Function reported risks into the Group ERM report.

Business review meetings in each Business Area and

Group Truck Division monitors and analyzes its largest
Business Review Meeting risks. This forms the basis for the ERM reporting.

Executive Management Teams in each Business Area and

Group Truck Division are fully responsible for risk and mitiga-
Executive Management Teams tion management in their respective area. Risks are identified,
mitigation activities are established, and monitoring and
reporting of progress is part of daily operations.

102
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 RISKS AND UNCERTAINTIES

Risk Categories
The ERM process classifies Volvo Group risks into four categories: strategic, operational, compliance and financial risks.

Consequences Management

Strategic risks Strategic risks may affect the Group’s ability to Strategic risks are managed through strategic
Long-term create value, the long-term development of the plans and business decisions taken by the Board
business and the possibility to reach the vision of Directors, Executive Board and management
and aspirations. teams throughout Volvo Group.

Operational risks Operational risks may affect the Group’s ability Operational risks are managed in operational
to enhance value and are important for the daily business decisions throughout Volvo Group on
business. all levels, by all employees.

Compliance risks Compliance risks may affect the Group’s ability Compliance with rules and regulations are part
to protect value against threats posed to its of operational business management and deci-
financial, organizational, or reputational standing. sions in all business in Volvo Group on all levels,
Short- and
by all employees.
medium-
term

Financial risks Financial risks may affect the Group’s ability
to enhance and protect the Group’s financial
position.
Financial risks are managed as an integrated
element of business operations where parts of
the responsibility have been centralized to Volvo
Group Treasury following the financial frame-
work; Volvo Group Financial Policies and Proce-
dures.

Principal risks can, separately or in combination, have a material adverse effect on

The following pages present the principal risks and uncertainties the Group’s business, strategy, financial performance, cash flow,
the Volvo Group are facing within each risk category. These risks shareholder value or reputation.

STRATEGIC RISKS

Technology shift and convergence
Balancing the research and development resources between the
traditional and new technologies is strategically important for the
Volvo Group. New technologies arising from digitalization, and an
increasing awareness of climate change, will enable autonomous,
electric and connected vehicles to deeply impact the transport,
logistics and construction industries – among others. The effect
will be particularly strong at the convergence of these technologies
as it affects vehicles, assets as well as infrastructures, and poten-
tially opens the way for a paradigm shift.
The lack of broadly accepted technologies and standards poses
significant risks for the Volvo Group and other participants in these
industries, as they are required to choose relevant technologies,
time their introduction wisely, while respecting the wide spread in
readiness level among markets and segments across the globe. A
further level of risk relates to the need to evolve from a vehicle/prod-
uct focus towards an ecosystem-driven approach, where vehicles and
infrastructures are to be developed and implemented simultaneously.
If the Volvo Group positions itself unsuccessfully in this technol-
ogy shift, earnings capacity and financial standing could be nega-
tively affected.
Comment
The Volvo Group is striving to lead the technology development.
Together with customers and suppliers, through early phase part-
nership, Volvo Group explores new technologies, desired features,
and levels of quality, cost, safety and environmental impact. Extra
focus is secured by dedicated organizations within autonomous,
electric and connectivity technologies and solutions. Furthermore,
Volvo Group is broadening its involvement into ecosystem-related
solutions and is today working much closer to customers, suppliers
and regulators to understand the pace of development in society.
Read more about the Volvo Group’s work within electrification,
automation and connectivity starting on page 20.

103
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
Intense competition
Competition in the industry may intensify if new participants enter
the market. The major global competitors are Daimler (Mercedes
and Freightliner), Traton (Scania, MAN and Navistar), Paccar (Ken-
worth, DAF and Peterbilt), Caterpillar and Komatsu. There are also
strong local brands, for example in China, India and Russia, active in
their domestic markets, which are expected to increase their pres-
ence in other parts of the world. Furthermore, overcapacity within
the industry can occur if there is a lack of demand. These trends in
the industry may impact the Volvo Group’s sales and potentially lead
to increased price pressure or lost market shares.
Comment
Proactive risk management is important to anticipate changes in
the competitive landscape and to protect the market positions of
the Volvo Group’s brands. Given the width of brands within the
Group, it is important to utilize synergies and economies of scale
while at the same time empower the Business Areas to take respon-
sibility for their businesses and offers. Continuous focus on product
and service development is an important mitigation measure in
order to keep the Group’s market position.
OPERATIONAL RISKS
Customer satisfaction
Top priority for the Volvo Group is to support its customers’ busi-
nesses and profitability in order for them to succeed, regardless of
segment, brand, product or service. Customer satisfaction is reliant
on the expectations in relation to the actual delivery or user experi-
ence of the total offer.
Customer satisfaction, and thereby the Group’s sales and reve-
nues, is at risk if the total experience is not at the expected level or
price point.
Comment
The Volvo Group strives for a culture where customer success is at
the heart of everything. Regardless of where in the value chain, the
Group engages in understanding its customers’ business and focus
efforts on creating value from the customer’s perspective.
The Volvo Group also puts a lot of effort on market research and
customer interviews to secure knowledge of customer needs.
Within product development, the Group has implemented a project
gate model and a governance structure where risks regarding pro-
ject and product quality, cost, project lead time and product
features are constantly monitored.
Staff at retailers and workshops are continuously trained and pro-
vided with instructions and guidelines on how to interact with their
104
RISKS AND UNCERTAINTIES
Extensive government regulation
Regulations regarding exhaust emissions, noise, safety and pollut-
ants from production plants and products are extensive. Most of the
regulatory challenges affecting the product range relate to reduced
emission levels. The risk for the Volvo Group is not being able to
assure an updated and compliant product range to meet current and
future regulations.
Local protectionism leading to changes in local content require-
ments can put the Volvo Group at a disadvantage compared to local
competitors, cause increased sourcing costs or require Volvo to
make significant investments.
Failure to assure an updated and compliant product range in time
to meet regulations, would negatively affect the Volvo Group’s earn-
ings capacity and financial standing.
Comment
The product development capacities within the Volvo Group are
coordinated, enabling a focus of resources for research and devel-
opment to meet emission regulations. Local content requirements
are continuously monitored, enabling the Group to take appropriate
measures in due time. Read more about product development and
emissions regulations starting on page 48.
customers. Web pages are aligned, positioned and developed
towards the brand’s targeted customers. Read more on page 44.
Cyclical commercial vehicles industry
The Volvo Group’s customers operate all over the world, some
within a single country and others across borders. A multitude of
global and regional economic, regulatory, digital, technological, cli-
mate and energy resource efficiency factors create strategic as well
as operational challenges for the industry.
Like many capital goods industries, the commercial vehicle indus-
try generally has been cyclical, with a strong correlation to GDP and
corresponding changes in transport demand, the need to replace
aging vehicles and machines, as well as changing laws and regula-
tions. Although there is a continued shift in focus in the commercial
vehicle industry from product to service, the cyclicality in sales and
profitability remains. The fluctuating demand for the Group’s prod-
ucts and services makes the financial result of the operations
dependent on the Group’s ability to react quickly to market changes.
Inability to adapt to a fluctuating demand could lead to capacity
constraints or underutilization of resources, which could have a
negative effect on earnings and financial position.
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
Comment
The Volvo Group strives to continuously balance production levels
and operating expenses, as well as enhance business agility in ful-
filling demands for new services.
Reliance on suppliers and scarce materials
The Volvo Group purchases raw materials and components from
numerous external suppliers. Suppliers and business partners come
from all around the world, thus sustainable solutions and close col-
laboration with suppliers are important for the success of the Volvo
Group. The purchase cost can vary significantly over a business
cycle due to changes in world market prices for raw materials and
currency impact. Simultaneous growth of sales in major markets
can create extraordinary capacity constraints in the supply chain.
Changes in demand in the automotive and commercial vehicle
industries as well as suppliers’ financial instability could also result
in delivery disturbances.
The ongoing technology shift into electrification and other new
customer offerings, combined with required investments in new
technologies, may move the industry and the Volvo Group towards
reliance on new suppliers which may have limited capacity. Effects
of delivery disturbances vary depending on the components’ lead
time and complexity as well as on the availability of alternative sup-
pliers and transport providers. Some components are standard
throughout the industry, other are Volvo Group unique.
Failure by the Volvo Group’s purchasing system to manage any of
these aspects efficiently, can have a negative effect on earnings
capacity and financial position.
Comment
Proactive efforts are put forth in establishing a robust and flexible
supply chain for the Volvo Group. To manage the high volatility in the
commercial vehicle market, capacity management is a focus area,
as well as social responsibility management in close cooperation
with suppliers and business partners. Read more about how we
work with suppliers on page 54 and reuse on page 62.
Industrial operations
The integrated industrial system is vital for the Volvo Group in order
to provide products to the customers cost-efficiently, with the right
quality, and on time. The Group strives to produce components as
well as complete vehicles and machines, and supply material to cus-
tomers and factories in a sustainable and resource-efficient way.
Disturbances and inefficiencies in the integrated system, as well as
undesirable effects on and from the external environment, such as
strikes, pandemics or extreme weather, could result in stoppages in
production, operations and parts deliveries, and thus negatively
affect the company’s business and reputation.
RISKS AND UNCERTAINTIES
Comment
The organization is continuously working on improvements and to
manage risks such as volume variations, supplier disruptions, legis-
lative changes, operational hazards and external environmental
impacts. The risks are also partially offset by the integration of the
industrial system itself, through the ability to manufacture and
source from other Volvo Group sites.
The contributions to environmental care include improving effi-
ciency in the use of natural resources like water, energy and chemi-
cals, reducing the dependency on hazardous substances, prevent-
ing adverse impacts from emissions to land, water and air, and
strategically working to increase renewable energy use and reduce
CO2 emissions.
In order to manage risks such as operational hazards, volume var-
iations, and supplier disruptions, the organization works cross-func-
tionally to maintain its desired production output, including delivery
of products and services with customer focus. Production risks are
managed through the Volvo Production System (VPS), to achieve
the highest quality with a focus on continuous improvement. Read
more about production, logistics and VPS starting on page 56.
Human capital
The Volvo Group strongly believes that there is a high correlation
between the Group’s future success and its capability to recruit,
retain and develop qualified personnel. To meet expectations from
employees and other stakeholders, a strong focus is required on
areas such as leadership, empowerment, employee engagement,
human rights, company culture and values, sharing of knowledge,
and building diverse teams. Failure to do the right things in these
areas can cause a negative impact on the Volvo Group’s reputation,
as well as on the image as an employer and on the ability of employ-
ees to develop the knowledge and skills necessary to ensure cus-
tomer success.
Comment
This risk is managed by leveraging the full diversity of the workforce
to ensure business success on a global arena and the Volvo Group
continuously monitoring changing legislation to ensure compliance.
The Volvo Group Pulse survey has been complemented by other tools
and processes designed to increase dialogue, which allows the Group
to capture the voice of employees and strengthen engagement. By
uniting employees through a common set of behaviors that are in line
with the business ambitions, the Group consciously grows an inclu-
sive culture and a value-based leadership. Read more about the
Group’s Employees on page 64.
105
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
Human rights
The Volvo Group should observe human rights principles under appli-
cable legislation throughout the world, as well as under its own
standards. Violation of human rights may potentially materialize not
only in the own organization, but also through the business relation-
ships and in the value chain. The Group is aware that conducting busi-
ness in certain parts of the world constitutes higher risks for potential
human rights violation, and has identified certain countries where the
Volvo Group has a substantial number of employees and/or close
business partners, which are considered high risk in this respect. The
Group is also aware that potential linkage through the supply chain as
well as Group products and services to segments such as the elec-
tronics industry, mining industry and heavy infrastructure projects
constitutes higher risks for human rights violations.
The consequences of human rights risks for the Volvo Group
depend on if the Group is seen as causing, contributing to or having
a linkage to the harm done, and could be anything from legal liability
to reputational and brand damage, depending also on the severity of
its nature.
Comment
People are at the core of what the Volvo Group does. In the Code of
Conduct, human rights issues are emphasized, for example mutual
respect, non-discrimination, safe and healthy workplace, freedom of
association and collective bargaining, working hours and compensa-
tion, as well as modern slavery and child labor. Read more on how the
Group manages human rights on page 42.
Residual value commitments
If the Volvo Group is offering the customer a residual value commit-
ment, it means that the customer can return the asset at the agreed
date and to the agreed price.
Volvo Group will have a residual value risk if the rebought vehicle
can be sold only for a price below the vehicle’s committed residual
value. A residual value commitment can also become a future used
vehicle inventory risk if vehicles are not sold, affecting the cash flow
negatively.
Comment
In order to minimize the risk and the impact on future profitability,
the Volvo Group has established processes and procedures within
each Business Area, where each Business Area assumes the respon-
sibility for establishing and maintaining a residual value matrix to
reflect fair future market values, proactive planning and manage-
ment of expiring contracts as well as portfolio evaluation. For further
information on residual value commitments as per December 31,
2019, please see Note 13 Tangible assets.
106
RISKS AND UNCERTAINTIES
Cybersecurity and IT infrastructure
The operation of many of the Volvo Group’s business processes
depends on reliable information technology (IT) systems. The sys-
tems may be subject to security incidents, including data breaches
or leakages, intrusions, industrial espionage, know-how and data
privacy infringements or unauthorized or accidental modifications
of information. Timely detection of security incidents is becoming
increasingly complex, and the Volvo Group seeks to investigate inci-
dents with a view to prevent their recurrence. Disruption of critical
IT services, or breaches of information security, could nevertheless
harm the Volvo Group’s reputation and have a significant adverse
effect on earnings and financial condition.
The Volvo Group relies heavily on third parties to whom it has
outsourced significant parts of maintenance and operations of its IT
systems. The Volvo Group has taken precautions in the selection
and ongoing management of these third parties, but events or inci-
dents caused by vulnerabilities in their operations or products could
cause significant disruptions in the Volvo Group’s operations.
Comment
The Volvo Group strives to identify and monitor vulnerabilities and
implement appropriate measures to mitigate identified risks to
avoid, prevent, reduce or transfer the impact. This is a recurring pro-
cess that adapts to changes in the risk and operational environment.
Security incidents that potentially involve personal data breach are
managed as part of the Volvo Group Data Protection compliance
program. Read more on page 40.
Political instability, security
The Volvo Group is active in more than 190 countries across the
world. Political instability, armed conflicts or civil unrest can impact
the Group’s ability to trade in affected areas. Acts of terrorism, sab-
otage or other criminal or illicit activities directed towards the Volvo
Group’s production system, transports or facilities, or those of its
suppliers or customers, could cause harm to people and severely
damage the Group’s operations.
Comment
The Volvo Group strives to identify and monitor vulnerabilities and
implement appropriate measures to mitigate identified risks to avoid,
prevent, reduce or transfer the impact. This is a recurring process
that adapts to changes in the risk and operational environment.
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
COMPLIANCE RISKS
Non-compliance with data protection laws
Data protection laws apply to the Volvo Group in the jurisdictions in
which Volvo operates. The EU General Data Protection Regulation
(“GDPR”), which became applicable from May 2018, has introduced
increased monetary penalties for breaches of the regulation. Non-­
compliance with data protection laws could expose the Group to fines
and penalties and severe infringements may potentially cause authori-
ties to issue instructions to stop processing of personal data, which
could disrupt operations. The Group could also be faced with litiga-
tions from persons allegedly affected by data protection violations.
Data protection law infringements may hence involve severe negative
impact for the business operations, including reputational damage and
adverse effect on the Group’s earnings and financial standing.
Comment
The data privacy area is closely monitored to identify improvement
areas, as well as potential issues that may have a negative impact on
the Volvo Group. The Code of Conduct emphasizes the importance of
compliance with data protection legislation and a Volvo Group Data
Privacy Compliance Program has been established. Further, the
Group Privacy Office (and connected network) manage implementa-
tion, monitoring and training in respect of the compliance program.
Read more on page 40.
Intangible assets
The Volvo Group owns or otherwise has rights to patents, trade-
marks, designs and copyrights that relate to the products and ser-
vices that the Group manufactures and markets. These rights have
been developed or acquired over a number of years and are valuable
to the operations of the Volvo Group. Further, in order to safeguard
investments in R&D, the Volvo Group has an intellectual property
plan defining the creation and use of its intellectual property rights.
AB Volvo and Volvo Car Corporation jointly own the Volvo brand and
trademarks through Volvo Trademark Holding AB. AB Volvo has the
exclusive right to use the Volvo name and trademark for its products
and services and according to a license agreement. Similarly, Volvo
Car Corporation has the exclusive right to use the Volvo name and
trademark for its products and services. The Volvo Group’s rights to
use the Renault brand and trademarks are related to the truck oper-
ations only and are regulated by a license from Renault s.a.s., which
owns the Renault brand and trademarks. In addition, the Volvo
Group owns several other trademarks relating to its business. Use in
possible conflict with third-party intellectual property rights, or
third-parties’ unauthorized use of the Volvo Group’s proprietary
rights, may have significant business impact on the Group.
Comment
The Volvo Group is continuously assessing intellectual property
rights of third parties as well as possible infringements by third par-
ties of the Group’s intellectual property rights.
RISKS AND UNCERTAINTIES
Complaints and legal actions
The Volvo Group may be the target of complaints and legal actions
initiated by customers, employees and other third parties alleging
health, environmental, safety or business-related issues, or failure
to comply with applicable legislation and regulations. Information
about legal proceedings involving entities within the Volvo Group
are found in Note 21 Other Provisions and in Note 24 Contingent
Liabilities. Even if such disputes are resolved successfully, without
having adverse consequences financially or on the values, they
could negatively impact the Group’s reputation and take up
resources that could be used for other purposes.
Comment
The Volvo Group has well-established structures and processes in
place to evaluate and handle complaints and legal proceedings with
the purpose of mitigating legal risks for the Group.
Environmental regulations
International agreements on limiting the CO2 emissions, such as the
Paris Agreement, together with related national and regional initia-
tives leads to continued and increased attention to climate change
and influence regulatory development. Environmental legislation is
developing in areas such as vehicle regulations on CO2 and on emis-
sion standards as well as chemical substance regulations. These
developments increase the need for monitoring and adaption to
new requirements. Even if challenges in these areas are resolved
and handled, they could have a negative impact on Group reputa-
tion, usage of resources, and cost of production, and may result in
adverse effects on earnings and financial position.
Comment
To mitigate risks and impact in the environmental regulatory area, the
Volvo Group invests substantial resources to adhere to different leg-
islations throughout the entire value chain. Examples of these are:
• Monitoring of upcoming environmental regulations and initiatives
which could have an impact on the business
• Governance structure to address upcoming environmental
requirements
• Prioritizations and investment decisions in regular operational
processes.
Read more about how the Group manages environmental risks in
the Value Chain section starting on page 38.
107
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
Corruption and non-compliance with competition law
Corruption risks are primarily linked to the activities of the Volvo
Group’s business partners (distributors and sales agents), for which
the Group may be responsible, as well as to the behaviors of employ-
ees in sales situations in relation to public officials and other cus-
tomer representatives. The overall risk level is also affected by the
fact that Volvo pursues business operations in many markets that
are considered high-risk from a corruption perspective. Potential
risks for non-compliance with competition law (e.g. price fixing,
market sharing, unlawful information exchange, abuse of market
power) are primarily linked to behavior of employees when interact-
ing with competitors and other external stakeholders in various sit-
uations. Corruption as well as competition law infringements may
involve severe negative impacts for the business operations, includ-
ing reputational damage, fines and imprisonment of employees. The
Group could also be affected by claims raised by persons or entities
affected by allegedly non-compliant practices.
FINANCIAL RISKS
Insurance
The Volvo Group generally takes out insurance coverage where it is
legally or contractually obligated to do so and otherwise against
such risks, in such amounts and on terms that it considers commer-
cially motivated from time to time. Where insurance coverage can-
not be procured on such terms, the Group can be exposed to mate-
rial uninsured losses, which could have a materially adverse effect
on Group operations and financial standing. For example, the Group
has substantial operations in Japan that are not fully insured against
effects from flooding, earthquakes and other natural disasters.
Comment
The Volvo Group strives to identify and monitor vulnerabilities and
implement appropriate measures to mitigate identified risks to avoid,
prevent, reduce or transfer the impact. This is a recurring process
that adapts to changes in the risk and operational environment.
108
RISKS AND UNCERTAINTIES
Comment
Corruption-related risks are managed via the Volvo Group’s Anti-­
Corruption Compliance Program, which consists of different mitigat-
ing activities including anti-corruption due diligence of business part-
ners. This is to ensure that the Group selects the right business
partners to prevent corrupt practices in connection with the sale of
products and services. As regards to employees and contractors, the
Code of Conduct emphasizes that Volvo employees and contractors
may not participate in or endorse any corrupt practices. The Code of
Conduct also emphasizes that the Group competes on the merit of
products and services and do not take actions that are illegal under the
competition laws, such as colluding with competitors. Also, regular
training is provided. Read more about the Compliance Programs on
page 40.
Credit risk
The Volvo Group is exposed to credit risk mainly through its sales to
customers in the Industrial Operations, and its long-term credit
receivables in its Financial Services operations. Total exposure as of
December 31, 2019 can be found in Note 15 Customer-financing
receivables, and Note 16 Receivables. The Group is also exposed to
financial credit exposure due to short-term deposits with the
Group’s core banks and unrealized results from derivatives used for
hedging purposes. For further information, please see Note 4 Goals
and policies in financial risk management and Note 15 Customer-­
financing receivables. If several larger customers, or a core bank,
fails to meet its undertakings the Group could suffer significant
losses.
Comment
The Volvo Group has set clear principles for how to manage external
customer relationship, including customer assessment, how to
manage and measure exposure and mitigate risks, monitoring of the
economic, political and industry conditions in each market, financ-
ing solutions, collection procedures and performance follow-up
structure. The Group has several so called CSA (Credit Support
Annex) agreements in place in order to decrease credit exposure
arising from hedge activities with financial derivatives.
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
Pension commitments
The Volvo Group has substantial pension commitments, some of
which are owed under defined benefit plans. Changes in assump-
tions of interest and inflation rates, mortality, retirement age and
pensionable remunerations could result in significant changes to the
present value of already accrued benefit obligations as well as the
cost of new benefit accruals, affecting funding level of such plans.
The investment performance of pension assets may also substan-
tially affect funding levels. Defined benefit plan assets are managed
independently from the Group, with a significant portion of plan
assets held in shares and other similar instruments that are exposed
to market risks. Please see Note 20 Provisions for post-employment
benefits for further information.
If there is a shortfall in benefit plans, the Volvo Group could be
required to make substantial cash contributions, which could
adversely affect cash flow and the Group’s financial position.
Comment
The exposure is controlled in the short term by ensuring strict adher-
ence to each plan’s investment policy and by proactively implement-
ing portfolio derisking strategies when deemed necessary.
Interest rate risk
Volvo Group’s net debt structure is exposed to fluctuations in mar-
ket interest rates. Movements in interest-rate levels may impact the
Group’s net income and cash flow or the value of financial assets
and liabilities.
Comment
The Industrial Operation’s interest-rate fixing is kept short, i.e.
below six months, to leverage on the countercyclical relationship of
short-term interest rates. Financial Services funding and lending
shall be matched to mitigate undesired volatility in profitability due
to interest-rate risk.
RISKS AND UNCERTAINTIES
Currency risk
The Volvo Group’s global presence means that business is con-
ducted in several different currency regions. More than 95% of the
Group’s net sales are generated in countries other than Sweden.
The Volvo Group’s cash flow, profitability, and balance sheet are
impacted by fluctuations in foreign exchange rates.
Comment
The Volvo Group strives to have sourcing and manufacturing located
in the major markets which offsets structural currency exposures,
and actively manages currency flows and translation risk to reduce
the impact on profitability and cash flow.
Liquidity risk
It is of critical importance for the Volvo Group to assure a sufficient
payment capability over time, to continuously manage demands
and expectations from external stakeholders.
Sudden changes in the business cycle, unforeseen events within
the financial markets, changes in the Volvo Group’s access to finan-
cial markets, and changes in customers’ appetite for financing from
the Group, may stress the Group’s liquidity preparedness.
Failure to properly manage the Group’s liquidity risks, may cause
material adverse impact on earnings capability and financial standing.
Comment
The Volvo Group ensures sound financial preparedness by always
keeping a certain portion of its sales in liquid assets. A sound balance
between short- and long-term debt maturities as well as long-term
committed credit facilities and cash, are intended to secure liquidity
preparedness and thus the Volvo Group’s payment capability.
Impairment
The Volvo Group has substantial values in goodwill and other in­
tangible assets on its balance sheet. Please see Note 12 Intangible
assets. The size of the surplus values differ between the operating
segments areas and they are, to a varying degree, sensitive to
changes in the business environment. Instability in the business
­recovery and volatility in interest and currency rates may lead to
­indications of impairment.
Comment
Goodwill is evaluated yearly or at any indication of impairment. Other
intangible assets are evaluated in case of indication of impairment.
109
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019 SUSTAINABILIT Y REPORTING

SUS TA IN A B IL I T Y REP OR T ING

INTEGRATED SUSTAINABILITY REPORTING

T
he Volvo Group´s mission is to drive prosperity
through transport solutions. Environmental, social
and financial sustainability aspects as well as ethi-
cal business conduct are integrated into the Volvo
Group’s overall strategy and business model and
we have an integrated Annual and Sustainability
Report where non-financial reporting requirements are included as
an integral part of our financial and operational statements.

Non-financial reporting in accordance with

the Swedish Annual Accounts Act

Volvo’s Business Model

With business operations in more than 190 countries whereof many
are classified as high risk countries from an environmental, human
rights and/or corruption perspective we need to secure that we pur-
sue our business operations in a responsible manner. Sustainability
aspects and responsible business behavior are integrated into
Volvo’s business model and also incorporated into Volvo’s policies
and processes. In line with our decentralized business model each
business area is responsible to ensure compliance with Volvo’s min-
imum standards relating to responsible business behavior. Volvo’s
strategy and business model are further described on pages 8–63.
Volvo Group Policies
The Volvo Group Code of Conduct is a Group-wide policy that sets
the standards on how we conduct business – ethically and in com-
pliance with applicable laws and regulations. It applies everywhere
we operate, for our employees and everyone else who works on our
behalf. The Code of Conduct is complemented by other policies that
describe in more detail how we address its minimum standards. The
Volvo Group also has a number of policies which sets out the Volvo
Group’s minimum requirements and standards relating to the envi-
ronment, employees, social factors, human rights and anti-corrup-
tion, see the index on the next page. Such minimum requirements
and standards apply for all our business operations in all parts of the
world. Our policies are in some areas complemented with manda-
tory compliance programs to ensure compliance with legal require-
ments and policy commitments, see page 40–41. In line with our
decentralized business model our various business areas are free to
complement existing policies and compliance programs with more
stringent requirements on environmental sustainability, social sus-
tainability and responsible business behavior for their respective
business area.
Risks and mitigations
The Volvo Group works with enterprise risk management (ERM)
which is a systematic and structured process to assess, report, ana-
lyze and follow-up the risks that might impact the Volvo Group’s
business operations. Hence, many of Volvo’s sustainability and
responsible business related risks and mitigations are reported as
part of the general risk analysis, see pages 102–109. The index on
the next page includes a more detailed overview on essential risks
and mitigations relating to the environment, employees, social fac-
tors, human rights and corruption in line with the non-financial
reporting requirements under the Swedish Annual Accounts Act.
We do not believe that we have any other non-financial factors that
are material for our business operations in the areas of the environ-
ment, employees, social factors, human rights or anti-corruption.
Key Performance Indicators
In line with our integrated sustainability reporting, KPI’s in relation
to the environment, employees, social factors, human rights and
corruption are integrated into our overall report, see further the
index on the next page.
GRI Report
In addition to this integrated Annual and Sustainability Report, the
Volvo Group has prepared a separate GRI Report. 

110
 GROUP PERFORMANCE BOARD OF DIRECTORS’ REPORT 2019
Policies Essential risks
Environment • Environmental • Environmental impact
Policy by our products
• Volvo Group Code • Environmental impact
of Conduct by our operations
• Supplier Code of • Environmental impact
Conduct by our value chain (sup-
pliers, business part-
ners and customers)
• Scarce materials and
minerals
Employees & • Volvo Group Code • Health and Safety
Social Factors of Conduct • Diversity and inclusion
• Health and Safety • Competence develop-
Policy ment and employment
Human Rights • Health and Safety • Adverse human rights
Policy impacts in our own
• Supplier Code of operations
Conduct • Adverse human rights
• Compliance Policy impacts in our supply
chain or linked to our
business partners
• Adverse human rights
impacts linked to the
use of our products
Anti- • Code of Conduct • Corrupt practices in
corruption
• Compliance Policy relation to suppliers,
business partners cus-
• Anti-Corruption tomers and others
Due Diligence
Policy
SUSTAINABILIT Y REPORTING
Mitigation activities KPI’s
• Product development • Product emissions: 35, 58
and new technologies: • Product recyclability rate: 62
20–31, 48–49
• Energy use and sources:
• Resource efficiency and 56–58
increased circularity:
62–63 • Energy efficiency: 35, 57–58
• Environmental govern- • CO2 emissions
ance of our own opera- scope 1 and 2: 57–58
tions: 56–59 • Supplier self-assessments
• Sustainable Purchasing and audits: 54–55
Program: 54–55 • ISO Certifications: 54, 56
• Responsible sales: 61
• Training: 55, 66
• Partnerships: 55
• Employee management: • Employee turnover: 65
65–66 • Gender diversity: 69
• Health and Safety: • Lost time accident rate
66–68 (LTAR): 66
• Labor Relations: 68 • Whistle blower cases: 40
• Inclusion and diversity:
69
• Grievance mechanisms:
40
• Training: 40, 66
• Human rights manage- • Supplier self-assessments
ment: 42–43 and audits: 54–55
• Sustainable purchasing • Whistle blower cases: 40
Process: 54–55
• Sustainable minerals
Program: 55
• Responsible sales: 61
• Grievance mechanisms:
40
• Training: 55, 61, 66
• Societal engagement
and partnerships: 35, 37,
46
• Compliance program: 40 • Whistle blower cases: 40
• Due diligence of
business partners: 40
• Whistleblower process:
40
• Training: 40
111
 GROUP PERFORMANCE 2019

NOTES
PAGE NOTE PAGE NOTE PARENT COMPANY PAGE
Notes to financial s­ tatements 113 11 Non-controlling interest 135 1 Accounting policies 180
Parent Company AB Volvo 176 12 Intangible assets 136 2 Revenue and intra-group transactions 180
Proposed policy for remuneration 206 13 Tangible assets 138 3 Administrative expenses 180
to senior executives 14 Leasing 141 4 Other operating income and expenses 181
Proposed disposition of unappropriated earnings 208 15 Customer-financing receivables 144 5 Income from investments 181
Audit report for AB Volvo 209 16 Receivables 146 in Group companies
Key ratios 212 17 Inventories 148 6 Income from investments in joint ­ 181
Eleven-year summary 215 ventures and associated ­companies
18 Cash and cash equivalents 149
7 Income from other investments 181
19 Equity and number of shares 150
NOTE THE VOLVO GROUP PAGE 8 Interest expenses and similar charges 181
20 Provisions for post-employment b ­ enefits 151
1 Accounting policies 113 9 Other financial income and expenses 181
21 Other provisions 156
2 Key sources of estimation uncertainty and 115 10 Appropriations 181
22 Liabilities 158
critical judgments 11 Income taxes 182
23 Assets pledged 159
3 Acquisitions and divestments of shares in 116 12 Intangible and tangible assets 183
24 Contingent liabilities 160
subsidiaries 13 Investments in shares and ­participations 183
25 Transactions with related parties 161
4 Goals and policies in financial risk 118 14 Other receivables 185
­management 26 Government grants 161
15 Untaxed reserves 185
5 Investments in joint ventures, associated 124 27 Personnel 162
16 Provisions for post-­employment benefits 186
companies and other shares and 28 Fees to the auditors 166
­participations 17 Non-current liabilities 187
29 Cash flow 166
6 Segment reporting 128 18 Other liabilities 187
30 Financial instruments 168
7 Revenue 130 19 Contingent liabilities 187
31 Changes in Volvo Group 172
8 Other operating income and expenses 132 Financial Reporting 2019 20 Cash flow 187
9 Other financial income and expenses 133
10 Income taxes 133

FINANCIAL STATEMENTS

Financial performance Financial position Cash flow statement Changes in

Page 74 Page 77 Page 82 consolidated equity
Page 98

112
 GROUP PERFORMANCE 2019 NOTES

NOTES TO FINANCIAL STATEMENTS

Amounts in SEK M unless otherwise specified. The amounts within parentheses refer to amounts for year 2018.

1 ACCOUNTING POLICIES

The consolidated financial statements for AB Volvo and its subsidiaries
have been prepared in accordance with International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board
(IASB), as adopted by the European Union, EU. This Annual Report is pre-
pared in accordance with IAS 1 Presentation of Financial Statements and
the Swedish Annual Accounts Act. In addition, RFR 1 Supplementary
Rules for Groups has been applied, which is issued by the Swe­dish Finan-
cial Reporting Board.
VOLVO GROUP’S ACCOUNTING POLICIES
area. The Volvo Group focuses on describing the accounting choices made
within the framework of the prevailing IFRS standard and avoids repeating
the actual text of the standard, unless the Volvo Group considers it particu-
larly important to the understanding of the note’s content. The following
symbols I/S and B/S show if amounts in the notes can be found in the
income statement or balance sheet. The total amount in tables and state-
ments might not always summarize as there are rounding differences. The
aim is to have each line item corresponding to the source and it might
therefore be rounding differences in the total. Refer to the table below to
see the note in which each accounting policy is applicable and the rele-
vant IFRS standard with material impact.

The Volvo Group describes the accounting policies in conjunction with each
note in the aim of providing enhanced understanding of each accounting

Accounting policies Note IFRS standard

Assets and liabilities held for sale 3, Acquisitions and divestments of shares in subsidiaries IFRS 5, IFRS 13
and discontinued o ­ perations
Acquisitions and divestments 3, Acquisitions and divestments of shares in subsidiaries IFRS 3
Joint ventures 5, Investments in joint ventures, associated companies and IFRS 11, IFRS 12, IAS 28
other shares and participations
Associated companies 5, Investments in joint ventures, associated companies and IFRS 12, IAS 28
other shares and participations
Other shares and participations 5, Investments in joint ventures, associated companies IFRS 7, IFRS 9, IFRS 13, IAS 28, IAS 32, IAS 36
and other shares and participations
Operating segments 6, Segment reporting IFRS 8
Revenue 7, Revenue IFRS 9, IFRS 15, IFRS 16
Financial income and expenses 9, Other financial income and expenses IFRS 9
Income taxes 10, Income taxes IAS 12
Non-controlling interest 11, Non-controlling interest IFRS 10, IFRS 12
Research and development 12, Intangible assets IAS 23, IAS 36, IAS 38
Goodwill 12, Intangible assets IFRS 3, IAS 36, IAS 38
Tangible assets 13, Tangible assets IFRS 13, IFRS 16, IAS 16, IAS 23, IAS 36, IAS 40
Leasing 14, Leasing IFRS 16
Inventories 17, Inventories IAS 2
Earnings per share 19, Equity and number of shares IAS 33
Pensions and similar obligations 20, Provisions for post-employment benefits IAS 19
Residual value risks 21, Other provisions IFRS 15, IAS 37
Product warranty 21, Other provisions IAS 37
Restructuring costs 21, Other provisions IAS 19, IAS 37
Extended coverage and service contracts 21, Other provisions IFRS 15, IAS 37
Insurance operations 21, Other provisions IFRS 4
Contingent liabilities 24, Contingent liabilities IAS 37
Transactions with related parties 25, Transactions with related parties IAS 24
Government grants 26, Government grants IAS 20
Incentive programs 27, Personnel IFRS 2, IAS 19
Cash flow statement 29, Cash flow IAS 7
Financial instruments 4, Goals and policies in financial risk management IFRS 7, IFRS 9
15, Customer-financing receivables IFRS 7, IFRS 9, IFRS 13, IFRS 16, IAS 32
  16, Receivables IFRS 7, IFRS 9, IFRS 13, IAS 32
18, Cash and cash equivalents IFRS 7, IFRS 9, IFRS 13, IAS 32
  22, Liabilities IFRS 7, IFRS 9, IFRS 13, IAS 32
30, Financial instruments IFRS 7, IFRS 9, IFRS 13, IAS 32

113
 GROUP PERFORMANCE 2019 NOTES

Consolidated financial statements

Principles for consolidation
The consolidated financial statements comprise the parent company, sub- Exchange rates Closing rate
Average rate as of Dec 31
sidiaries, joint ventures and associated companies. Intra-group transac-
Country Currency 2019 2018 2019 2018
tions as well as gains on transactions with joint ventures and associated
companies are eliminated in the consolidated financial statements. Australia AUD 6.5724 6.4954 6.5125 6.3245
Read more in Note 3 Acquisitions and divestment of shares in subsidiaries. Brazil BRL 2.4007 2.3875 2.2979 2.3164
 ead more in Note 5 Investments in joint ventures, associated companies
R Canada CAD 7.1308 6.7139 7.1283 6.5922
and other shares and participations, about definitions of subsidiaries, joint China CNY 1.3691 1.3139 1.3333 1.3068
ventures and associated companies. Euro Zone EUR 10.5888 10.2607 10.4336 10.2753
Read more in Note 11 Non-controlling interest. Great Britain GBP 12.0658 11.5973 12.2145 11.3482
Japan JPY 0.0868 0.0787 0.0853 0.0812
Translation to Swedish kronor when consolidating companies that have
Norway NOK 1.0747 1.0693 1.0579 1.0245
other functional currencies
South Africa ZAR 0.6548 0.6585 0.6668 0.6213
The functional currency of each Volvo Group company is determined
South Korea KRW 0.0081 0.0079 0.0081 0.0080
based on the primary economic environment in which the company oper-
United States USD 9.4604 8.6995 9.3171 8.9710
ates. The primary economic environment is normally in which the com-
pany primarily generates and expends cash. The functional currency are in
1:1
most cases, the currency in the country where the company is located. AB
Volvo’s and the Volvo Group’s presentation currency is SEK. In preparing
New accounting policies 2019
the consolidated financial statements, items in the income statements of
As from January 1, 2019, the Volvo Group applies the following new account-
foreign subsidiaries are translated to SEK using monthly average exchange
ing standards and interpretations:
rates. Balance sheet items are translated into SEK using exchange rates
at year end (closing rate). Exchange differences are recognized in other
IFRS 16 Leases
comprehensive income and accumulated in equity.
IFRS 16 is a new accounting standard for lease accounting and is applied
The accumulated translation differences related to a certain subsidiary,
from January 1, 2019. The major impact of the new standard for the Volvo
joint venture or associated company are reversed to the income state-
Group and the effect of implementation are disclosed in note 31.
ment as a part of the gain/loss arising from disposal of the company or
repayment of capital contribution from the company.
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 is a new interpretation for how to account for uncertain income
Receivables and liabilities in foreign currency
tax treatments and is applied from January 1, 2019. The major impact of
Receivables and liabilities in currencies other than the functional currency
the new interpretation for the Volvo Group and the effect of implementation
of the reporting entity (foreign currencies) are translated to the functional
are disclosed in note 31.
currency using the closing rate. Exchange rate gains and losses arising
from operating assets and liabilities impact operating income while
Other new or revised accounting standards or interpretations are not con-
exchange rate gains and losses arising from financial assets and liabilities
sidered to have a material impact on the Volvo Group’s financial state-
impact financial income and expenses. Interest-bearing financial assets
ments.
and liabilities are defined as items included in the net financial position of
the Volvo Group (see section Key ratios). Exchange rate differences on
New accounting policies 2020 and later
loans and other financial instruments in foreign currency, which are used to
There are no new or revised accounting standards or interpretations that
hedge net assets in foreign subsidiaries and associated companies, are off-
have been published which are effective from 2020 and later that are con-
set against translation differences in equity of the respective companies.
sidered to have a material impact on the Volvo Group’s financial state-
Read more in Note 4 Goals and policies in financial risk management, ments.
about currency exposure and currency risk management.

The most important exchange rates used in the consolidated financial

statements are shown in table 1:1.

114
 GROUP PERFORMANCE 2019 NOTES

2 KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL JUDGMENTS

The Volvo Group’s most significant accounting policies are described

together with the applicable note, read more in note 1 Accounting Policies
Source of estimation
for a specification. The preparation of AB Volvo’s Consolidated Financial
uncertainty and critical
Statements requires the use of estimates and assumptions that may
judgments Note
affect the recognized amounts of assets and liabilities at the date of the
financial statements. In addition, the recognized amounts of net sales and Sales with residual value commit- 7, Revenue
expenses during the periods presented are affected. In preparing the ments and variable sales price
financial statements, management has made its best judgments of cer- Deferred taxes and uncertainty over 10, Income taxes
tain amounts included in the financial statements, materiality taken into income tax treatments and claims
account. Actual results may differ from previously made estimates. In Impairment of goodwill and other 12, Intangible assets
­intangible assets
accordance with IAS 1, the company is required to disclose the assump-
Impairment of tangible assets and 13, Tangible assets
tions and other major sources of estimation uncertainties that, if actual
residual value risks
results differ, may have a material impact on the financial statements.
Measurement of lease liabilities and 14, Leasing
right-of-use assets
Allowance for expected credit 15, Customer-financing

  The sources of estimation uncertainty and critical judgments

identified by the Volvo Group and which are considered to fulfill
these criteria are presented in connection to the items considered to be
losses

Inventory obsolescence
­receivables
16, Receivables
17, Inventories
affected. The table 2:1 discloses where to find these descriptions. Assumptions when calculating 20, Provisions for
post-employment benefits post- ­employment
benefits
Provisions for product warranty and 21, Other provisions
provisions for legal proceedings

2:1

115
 GROUP PERFORMANCE 2019
3 ACQUISITIONS AND DIVESTMENTS OF SHARES IN SUBSIDIARIES
ACCOUNTING POLICY
Recognition of acquisitions and divestments
All acquisitions and divestments are recognized in accordance with the
acquisition method. Volvo Group measures acquired identifiable assets,
tangible and intangible, and liabilities at fair value. Any surplus amount
from the ­purchase price, possible non-controlling interest and fair value of
previously held equity interests at the acquisition date compared to the
Volvo Group’s share of acquired net assets is recognized as goodwill. Any
deficit amount, known as gain from a bargain purchase, is recognized in
the income statement.
For acquisitions done in stages, a business combination occurs only on
the date control is achieved, which is also the time when goodwill is cal-
culated. Transactions with the non-controlling interest are recognized as
equity as long as control of the subsidiary is retained. For each business
combination, the Volvo Group decides whether the non-controlling inter-
est shall be valued at fair value or at the non-controlling interest’s propor-
tionate share of the net assets of the acquiree. All acquisition-related costs
are expensed. Companies acquired during the year are consolidated as of
the date of acquisition. Companies that have been divested are included
in the consolidated financial statements up to and including the date of
the divestment. Divestment of operations with the main purpose to dis-
pose intangible and tangible assets is treated as disposal of intangible and
tangible assets.
116
NOTES
Assets and liabilities held for sale and discontinued operations
In a global group like the Volvo Group, processes are continuously ongoing
regarding the sale of assets or groups of assets at minor values. When the
criteria for being classified as an assets and liabilities held for sale are ful-
filled and the asset or group of assets are of significant value, the asset or
group of assets, both current and non-current, and the related liabilities are
recog­nized on separate lines in the balance sheet. The asset or group of
assets are measured at the lower of its carrying amount and fair value after
deductions for selling expenses. The balance sheet items and the potential
income effect resulting from the revaluation to fair value less selling
expenses are, if related to Industrial Operations, normally recognized in the
segment Group functions & Other, otherwise in the Financial Services
segment. When the sale is completed the result is distributed to the
­relevant segments.
AB Volvo’s holding of shares in subsidiaries as of December 31, 2019 is
disclosed in note 13 for the Parent Company. Significant acquisitions,
formations and divestments within the Volvo Group are listed below.
Acquisitions during the period
The Volvo Group has not made any acquisitions of subsidiaries during
2019 and 2018, which solely or jointly have had a significant impact on
the Volvo Group’s financial statements.
 GROUP PERFORMANCE 2019 NOTES

Divestments during the period Assets and liabilities held for sale
The Volvo Group has made divestments during 2019 which resulted in a As of December 31, 2019, the Volvo Group recognized assets and liabili-
positive effect on operating income of SEK 1,606 M. The gain mainly per- ties held for sale amounting to SEK 32,773 M (203) and SEK 10,413 M (–)
tains to sale of the majority of the Volvo Group’s holding of shares in Wire- respectively. The amounts increased during the year are mainly due to the
lessCar. The Volvo Group has not made any other acquisitions or divest- intention to transfer ownership of the complete UD Trucks business glob-
ments during 2019 that have had a significant impact on the Volvo Group. ally from the Volvo Group to Isuzu Motors. No translation differences on
The Volvo Group did not made any divestments during 2018, which solely foreign operations were recognized in other comprehensive income
or jointly had a significant impact on the Volvo Group’s financial state- related to the reclassified assets and liabilities held for sale.
ments. For the comparative year 2018, the Volvo Group recognized assets
The impact on the Volvo Group’s balance sheet and cash flow state- amounting to SEK 203 M as assets and liabilities held for sale. Those
ment in connection with the divestment of subsidiaries and other busi- mainly pertained to planned property divestments. No translation differ-
ness units are specified in the following table: ences on foreign operations were recognized in other comprehensive
income related to the reclassified assets and liabilities held for sale.
Assets and liabilities held for sale in Industrial Operations has been
reclassified within the segment Group functions & Other. Assets and lia-
Divestments 2019 2018 bilities held for sale in Financial Services has been reclassified within the
segment Financial Services.
Property, plant and equipment –1 –25
Assets under operating lease –1 –
Inventories – –4
Accounts receivables –133 – Assets and liabilities held for sale Dec 31, Dec 31,
Other receivables –248 2 2019 2018
Cash and cash equivalents – – Intangible assets 3,096 –
Provisions 13 – Tangible assets 11,831 203
Trade payables 118 – Financial assets 4,324 –
Other liabilities 146 – Inventories 5,510 –
Divested net assets –106 –27 Accounts receivable 4,742 –
Goodwill –22 – Other current receivables 3,269 –
Total –128 –27 B/S   Total assets 32,773 203
Additional purchase price – –
Provisions 1,340 –
Cash and cash equivalents received 1,343 30 Other non-current liabilities 910 –
Cash and cash equivalents, divested Trade payables 4,774 –
­companies – – Other current liabilities 3,388 –
Effect on Volvo Group cash and B/S   Total liabilities 10,413 –
cash equivalents 1,343 30
Effect on Volvo Group net financial position 1,324 30 3:2

3:1
Acquisitions and divestments after the end of the period
The Volvo Group has not made any acquisitions or divestments after the
end of the period that have had a significant impact on the Volvo Group.

117
 GROUP PERFORMANCE 2019
4 GOALS AND POLICIES IN FINANCIAL RISK MANAGEMENT
The Volvo Group’s global operations expose the Group to financial risks in
the form of interest rate risks, currency risks, credit risks, liquidity risks and
other price risks. The board of AB Volvo has adopted a financial risk policy
that regulates how these risks should be controlled and governed and
defines roles and responsibilities within the Volvo Group. The financial risk
policy also establishes principles for how financial activities shall be carried
out, sets mandates and steering principles for the management of financial
risks as well as defines the financial instruments to be used for mitigating
these risks. The financial risk policy is reviewed on an annual basis. The
FINANCIAL RISKS
INTEREST RATE RISKS CURRENCY RISKS CREDIT RISKS
COMMERCIAL CURRENCY COMMERCIAL
CASH FLOW RISKS
EXPOSURE CREDIT RISK
PRICE RISKS
FINANCIAL CURRENCY
FINANCIAL CREDIT RISK
EXPOSURE
CURRENCY EXPOSURE FINANCIAL
OF EQUIT Y COUNTERPART Y RISK
INTEREST RATE RISKS
INTEREST RATE RISKS A matching degree excludes equity, which amounted to 8% in Financial
Interest rate risk refers to the risk that changed interest rates will affect
the Volvo Group’s net income and cash flow (cash flow risk) or the fair
value of financial assets and liabilities (price risk).
POLICY
Matching the interest fixing terms of financial assets and liabilities reduces
the exposure. Interest rate swaps are used to change/influence the inter-
est fixing term for the Volvo Group’s financial assets and liabilities. Currency
interest rate swaps enable borrowing in foreign currencies from different
markets without introducing currency risk. The Volvo Group may from
time to time use other types of forward contracts (futures) and forward
rate agreements (FRAs). Most of these contracts are used to hedge
­interest rate levels for current borrowing or investments.
Cash flow risks
The effect of changed interest rate levels on future currency and interest­
flows primarily pertains to Financial Services and Industrial Operations’
net financial items. Financial Services measure the degree of match­ing
1 The sensitivity analysis on interest rate risk is based on simplified assumptions.
It is not unlikely for market interest rates to change by one percentage point on
an annual basis. However, in reality, these rates often rise or decline at ­different
points in time. The sensitivity analysis also assumes a parallel deferment of
the return curve, and that the interest on assets and liabilities will be equally
impacted by changes in market interest rates. Accordingly, the impact of real
interest­rate changes may differ from the analysis presented in table 4:1.
118
NOTES
Volvo Group manages financial risk as an integrated element of the busi-
ness operations where parts of the responsibility for the finance operation
and financial risk management are centralized to Volvo Group Treasury, the
internal bank of the Volvo Group.
 ead more in Note 30 Financial instruments about accounting policies
R
for financial instruments.
Read more in section Financial Management, page 97 and section Risks
and uncertainties, page 102 about financial risk management.
LIQUIDITY RISKS OTHER PRICE RISKS
COMMODIT Y RISKS
USD
15.9
BRL
7.6
interest rate fixing on borrowing and lending. The calculation of the
Services. At year end 2019, the degree of such matching ratio was 99%
(100) in Financial Services which is in line with the Group policy. In
­addition to the financial assets in Financial Services, the Volvo Group’s
interest-bearing assets consisted primarily of cash and cash equivalents.
On December 31, 2019 the average interest on Industrial Operations
financial assets was 0.4% (0.6). The Industrial Operations results and
profitability are closely aligned to the business cycle. Therefore in order to
minimize the interest rate risk, outstanding loans had interest terms
­corresponding to an interest rate fixing of between one to three months.
The average interest on Industrial Operations financial liabilities at year
end amounted to 4.4% (4.5), including the Volvo Group’s credit costs.
Table 4:1 shows the impact on income after financial items in Industrial
Operations net financial position, excluding lease liabilities and pensions
and similar obligations, if interest rates were to increase by 1 percentage
point, assuming an average interest rate fixed term of three months on the
liability side.1 The impact on equity is earnings after tax.
Price risks C
Exposure to price risk as a result of changed interest rate refers to financial
assets and liabilities with a longer interest rate fixing term (fixed interest).
This is not a risk for Industrial Operations since all outstanding loans are
signed with a short interest rate fixing.
 ead more in Note 20 Provisions for post-employment benefits regard-
R
ing s­ ensitivity analysis on the defined benefit obligations when changes in
the ­applied assumptions for discount rate and inflations are made.
 GROUP PERFORMANCE 2019 NOTES

The Volvo Group’s

net assets in different
currencies (SEK bn) = Risk net financial Net financial  Impact on income Impact on net financial
position Dec 31, ­position excl. after financial items position if SEK a­ ppreciates
2019 ­pensions and if interest rate rises 1% against other ­currencies 10%
SEK M lease liabilities
A (Interest rate risks) B (Currency risks)
SEK 42,212 453 –
JPY –14,236 –124 1,424
EUR 10,795 95 –1,079
USD 10,605 94 –1,060
CNY 6,210 64 –621
GBP 4,668 41 –467
SEK
47.8 Other 2,342 29 –234
Total C 62,596 653 –2,038
GBP 5.1
Read more about the Industrial Operations net financial position.
EUR 4:1
20.3
JPY 5.8
KRW 4.4

CNY
14.1

INR 2.0
OTHER 15.3

CURRENCY RISKS

CURRENCY RISKS B POLICY

The balance sheet may be affected by changes in different exchange
rates. Currency risks in the Volvo Group’s operations are related to
changes in the value of contracted and expected future payment flows
(commercial currency exposure), changes in the value of loans and invest-
ments (financial currency exposure) and changes in the value of assets
and liabilities in foreign subsidiaries (currency exposure of equity).
The aim of the Volvo Group’s currency risk management is to secure cash
flow from firm flows through currency hedges pursuant to the established
Financial risk policy, and to minimize the exposure of financial items in the
Volvo Group’s balance sheet. Below is a presentation on how this work
is conducted for commercial and financial currency exposure, and for
­currency exposure of equity.

Volvo Group’s outstanding derivatives hedging commercial currency risks December 31, 2019

Millions USD/SEK USD/KRW GBP/SEK EUR/USD USD/BRL

Due date 2020 228 156 107 –24 13

Total local currency 228 156 107 –24 13

Average contract rate 9.49 1,171.41 12.24 1.14 3.82

Market value of outstanding derivatives, SEK M 47 31 5 –3 7

4:2

119
 GROUP PERFORMANCE 2019 NOTES

Goals and policies in financial risk management (cont.)

Translation exposure from the consolidation of operating income in

­foreign subsidiaries
Sensitivity analysis1
In conjunction with the translation of operating income in foreign subsidi-
aries, the Volvo Group’s income is impacted if currency rates change. The
Risk currency Impact on operating
­exposure income if currency rate Volvo Group does not hedge this risk. Graph 4:7 shows the translation
Transaction
2019 exposure from appreciates against all effect in key currencies when consolidating operating income for 2019 in
operating other currencies by 10% foreign subsidiaries in Industrial Operations.
SEK bn net flows B (Currency risks)
Read more in section Currency exposure of equity.
SEK –53 –5.3
KRW –7 –0.7
Sensitivity analysis for transaction exposure 1
EUR 7 0.7
The table 4:3 illustrates the impact on operating income if key currencies
GBP 9 0.9 for Volvo Group appreciate by 10% against all other currencies. Hedge
USD 12 1.2 accounting is not applied on derivatives hedging cash flows in foreign
The deficit in transaction exposure in SEK is mainly generated from ­currency. As a consequence the impact on equity equals the impact on
flows in USD, GBP, EUR, NOK and ZAR against SEK. operating income before tax.

4:3 Volvo Group currency review

The tables and graphs 4:4 4:5 4:6 4:7 and 4:8 illustrate the transaction
Commercial currency exposure exposure and currency impact on operating income from commercial net
Transaction exposure from commercial flows flows in foreign currency , translation effect when consolidating operating
The Volvo Group conducts manufacturing in 18 countries around the income in foreign subsidiaries and currency impact on sales in key
globe and more than 95% of net sales are generated in countries other ­currencies.
than Sweden. Transaction exposure from commercial flows in foreign
­currency is generated from internal purchases and sales between manu-  ead more about Volvo Group transaction exposure in section
R
­C ommercial currency exposure above.
facturing entities and market companies and external sales and purchases
in foreign currency around the globe. As the predominant parts of the
Financial currency exposure
operations in the Volvo Group are situated outside Sweden, the fluctu­
Loans and investments in the Volvo Group’s subsidiaries are performed
ations in currency rates affecting the transaction flows in foreign currency
mainly in local currencies through Volvo Group Treasury, which minimizes
are in many cases not against SEK. Volvo Group’ transaction exposure in
individual companies’ financial currency exposure. Volvo Group Treasury
key currencies is presented in graph 4:5. The graph represents the trans-
uses various derivatives to facilitate lending and borrowing in different
action exposure from commercial operating net cash flows in foreign
currencies without increasing the risk for the Volvo Group. The net
­currency, expressed as net surpluses or deficits in key currencies. The
­f inancial position of the Volvo Group is affected by currency fluctuations
deficit in SEK and KRW is mainly an effect of manufacturing costs in the
since financial assets and liabilities are distributed among the Volvo Group
plants in Sweden and South Korea, but limited external revenues in those
companies that conduct their operations using different currencies.
currencies. The surplus in EUR on the other hand, is the net of significant
Table 4:1 discloses the impact on income after financial items on Indus-
gross volumes of sales and purchases made by many entities around the
trial Operations net financial position, excluding pensions and similar net
globe in EUR. The surplus in USD is mainly generated from external sales
obligations, if SEK were to strengthen by 10%.
to entities in the USA and emerging markets. The surplus in GBP is
­generated from external sales to the UK.
Currency exposure of equity
The hedging of the Volvo Group’s commercial currency exposure is
The carrying amount of assets and liabilities in foreign ­subsidiaries are
executed centrally. The Volvo Group’s consolidated currency portfolio
affected by current exchange rates in conjunction with the translation of
exposure is the value of forecasted flows in foreign c ­ urrency. The Volvo
assets and liabilities to SEK. To minimize currency exposure of equity, the
Group only hedge the part of the forecasted portfolio that is considered
size of equity in foreign subsidiaries is continuously optimized with respect
highly probable to occur, i.e. firm flows, where the main parts will be real-
to commercial and legal conditions. Currency hedging of equity may occur
ized within six months. The Volvo Group uses forward contracts and
in cases where a foreign subsidiary is considered overcapitalized. Net
­currency options to hedge the portion of the value of forecasted future
assets in foreign subsidiaries, associated companies and joint ventures
payment flows in foreign currency. The hedged amount of firm flows for
amounted at year end 2019 to SEK 90 billion (80). The need to undertake
all periods fall within the framework of the Volvo Group’s Financial risk
currency hedging relating to investments in associated companies, joint
policy. Table 4:2 shows outstanding derivatives for the hedging of
ventures and other companies is assessed on a case-by-case basis.
­commercial currency risks.
On the map on the previous pages the Volvo Group’s net assets in
­different currencies (SEK bn) are displayed.

 ead more in Note 30 Financial instruments about Volvo Group’s policy

R
choice on hedge accounting.

1 The sensitivity analysis on currency rate risks is based on simplified assump- same direction at any given time, so the actual effect of exchange rate
tions. It is not unlikely for a currency to appreciate by 10% in relation to other changes may differ from the sensitivity analysis.
­currencies. In reality however, all currencies usually do not change in the Please refer to tables 4:1 4:3

120
 GROUP PERFORMANCE 2019 NOTES

The Volvo Group’s currency review

When the Volvo Group communicates the currency impact on operating income, the following factors are included:

Currency impact on operating income, Volvo Group, SEK billion 2019 2018  Change

Net flows in foreign currency 2.0

Realized and unrealized gains and losses on hedging contracts –0.0 –0.0 –0.0
Unrealized gains and losses on receivables and liabilities in foreign currency –0.1 –0.4 0.3
Translation effect on operating income in foreign subsidiaries 2,0
Total currency impact on operating income Volvo Group 4,3

Currency impact on net flows in foreign currency is detailed in graph 4:6 and Translation effect on operating income in foreign subsidiaries
is detailed in graph 4:7 in key currencies.

4:4

Transaction exposure from commercial net flows in 2019 and 2018 Currency impact on operating income from net flows in foreign
currency 2019 versus 2018
SEK bn
30 SEK bn
1.0
15
0.8
0
0.6
–15 0.4

–30 0.2
0.0
–45
–0.2
–60
–0.4
USD GBP EUR NOK ZAR CAD AUD KRW SEK Other
12 9 7 7 5 5 4 –7 –53 12 –0.6
9 10 8 5 5 7 5 –9 –54 15 USD GBP Other CAD EUR KRW
0,9 0,4 0,4 0,3 0,1 –0,2
Currency flow 2018 Currency flow 2019
Changes in currency rates compared to 2018 (Total SEK 2.0 bn).
 he graph above represents the transaction exposure from commer-
T
cial ­operating net cash flows in foreign currency, expressed as net Currency effect on operating income from net flows in foreign
surpluses or deficits in key currencies. ­currency in Volvo Group is presented in the graph above.

Read more in section Commercial currency exposure. 4:6

4:5

Translation effect on operating income in 2019 versus 2018 Currency impact on net sales in 2019 versus 2018

SEK M SEK M
1,400 12,000
1,200
10,000
1,000
8,000
800
6,000
600
4,000
400
200 2,000

0 0
–200 –2,000
USD JPY CNY EUR CAD RUB BRL MXN Other INR USD Other EUR JPY CNY GBP RUB BRL ZAR
1.284 203 143 131 107 98 40 36 9 –41 10,428 3,266 3,257 1,934 1,208 760 590 177 –29

Changes in currency rates compared to 2018 (Total SEK 2,011 M). Changes in currency rates compared to 2018 (Total SEK 21,591 M).

Translation effect when consolidating operating income in foreign
­subsidiaries for Volvo Group is presented in the graph above.
4:7
Currency effect on net sales from inflows in foreign currency and
translation effect when consolidating net sales in foreign subsidiar-
ies for Volvo Group is presented in the graph above.
4:8

121
 GROUP PERFORMANCE 2019
Goals and policies in financial risk management (cont.)
CREDIT RISKS
CREDIT RISKS
Credit risk is defined as the risk that the Volvo Group does not receive pay-
ment for recognized accounts receivables and customer-financing receiv-
ables (commercial credit risk), that the Volvo Group’s investments are
unrealizable (financial credit risk) and that potential profit is not realized
due to the counterparty not fulfilling its part of the contract when using
derivative instruments (financial counterparty risk).
POLICY
The objective of the Volvo Group’s credit risk management is to define,
measure and monitor the credit exposure in order to minimize the risk of
losses deriving from credit to customers and suppliers, financial credit risk,
counterparty risk and customer finance activities within Financial Ser-
vices.
Commercial credit risk
The Volvo Group’s credit granting is steered by group policies and
­customer-classification rules. The credit portfolio should contain a distri-
bution among different customer categories and industries. The credit
risk is managed through active credit monitoring, follow-up routines and,
where applicable, product repossession. Moreover, regular monitoring
ensures that necessary allowances are made for expected credit losses on
financial assets. Risk management practices for Financial Services are pre-
sented in note 15 Customer-financing receivables and for Industrial Opera-
tions in note 16 Receivables. Moreover, note 15 includes information on
gross exposure for customer-financing receivables by past due status and
in note 16 accounts receivables, a gross exposure for accounts receiva-
bles by past due status is presented in relation to allowance for expected
credit losses. The customer-financing receivables in the Volvo Group
amounted to net SEK 143 billion (127) on December 31, 2019. The credit
risk of this portfolio is distributed over a large number of retail customers
and dealers. Collateral is provided in the form of the financed products. In
the credit granting the Volvo Group strives for a balance between risk
exposure and expected return.
The Volvo Group’s accounts receivables as of December 31, 2019
amounted to net SEK 38 billion (42).
 ead more in Note 15 Customer-financing receivables about Volvo
R
Group’s concentration of credit risk in Financial Services.
R
 ead more in Note 16 Receivables.
The impact from netting agreements and cash transfers on the Volvo Group’s gross exposure from derivatives as per Dec 31, 2019
Gross amount
Interest and currency risk derivatives reported as assets 2,015
Interest and currency risk derivatives reported as liabilities 2,469
122
NOTES
Financial credit risk
The Volvo Group’s financial assets are to a large extent managed by Volvo
Group Treasury. All investments must meet the requirements of high
liquid­ity and low credit risk. According to the Volvo Group’s financial risk
policy, this includes using counterparties for investments and derivative
transactions with a credit rating better or equivalent to A– from one of the
well-established credit rating institutions or similar.
Cash and cash equivalents including marketable securities as of
December 31, 2019 amounted to SEK 62 billion (47) and consists primar-
ily of bank account positions.
Read more in Note 18 Cash and cash equivalents.
Financial counterparty risk
The use of derivatives involves a counterparty risk, in that a potential loss
may not be possible to offset (in full or in part) against a potential gain if
the counterparty fails to fulfill its part of the contract. The Volvo Group is
actively working with limits per counterpart in order to reduce risk for high
net amounts towards individual counterparts. To reduce the expos­ure fur-
ther the Volvo Group enters into master netting agreements, so ­called
ISDA agreements, with all counterparts eligible for derivative transac-
tions. The netting agreements provide the possibility for assets and lia­
bilities to be offset under certain circumstances, such as in the case of the
counterpart’s insolvency. A Credit Support Annex (CSA) often accompa-
nies the ISDA agreement. The CSA stipulates the terms and conditions
under which the two parties are required to make cash transfers to each
other in order to further reduce the exposure from the net open positions.
The netting agreements have no effect on the income statement or the
financial position of the Volvo Group, since derivative transactions are
accounted for on a gross basis. Table 4:9 shows the effect of netting
agreements and cash transfers on the Volvo Group’s gross exposure from
outstanding interest and currency risk derivatives as per December 31,
2019.
 ead more in Note 30 Financial instruments about the Volvo Group’s
R
gross exposure from positive derivatives per type of instrument.
Netting
­agreements Cash ­transfers Net position Change
–1,409 –376 230 89%
–1,409 –775 285 88%
4:9
 GROUP PERFORMANCE 2019 NOTES

LIQUIDITY RISKS

LIQUIDIT Y RISKS
Liquidity risk is defined as the risk that the Volvo Group would be unable
to finance or refinance its assets or fulfill its payment obligations.
The hybrid bond in the Volvo Group amounting to EUR 1.5 billion was
issued in 2014 in order to further strengthen the Volvo Group’s balance
sheet and prolong the maturity structure of the debt portfolio. The hybrid
bond is classified as a loan with an original duration of 61.6 years, subor-
dinated to all other financial liabilities currently outstanding.
Read more in Note 14 Leasing about the maturity for non-current lease
­liabilities in table 14:5.

POLICY
Future cash flow including lease liabilities and derivatives
The Volvo Group ensures sound financial preparedness by always keeping related to non-current and current financial liabilities1
a certain percentage of its sales in liquid assets, mainly as bank account
positions in banks rated at least A– from one of the well-established SEK bn
credit rating institutions or similar. A sound balance between current and
0
non-current debt maturities, as well as non-current committed credit
facilities, is intended to secure liquidity preparedness, and thus the Volvo
Group’s payment capability.

–20

The Volvo Group’s cash and cash equivalents amounted to SEK 62 billion
(47) on December 31, 2019. In addition to this, granted but unutilized
credit facilities amounted to SEK 43 billion (44). Graph 4:10 discloses
expected future cash flows related to financial liabilities. Capital flow refers –40
to expected payments of loans, lease liabilities and derivatives, see note
22 Liabilities. Expected interest flow refers to the future interest payments
on loans, lease liabilities and derivatives based on interest rates antici-
pated by the market. The interest flow is recognized within cash flow from
–60
operating activities. The maturity structure of the unutilized credit facilities 2020 2021 2022 2023 2024 2025 2026 or later
is also disclosed in note 22, in table 22:3. The predominant part of
expected future cash flows that expire within 2020 and 2021 is an effect –56.1 –47.3 –20.9 –10.2 –3.6 –1.0 –18.6
–3.5 –1.9 –1.1 –0.7 –0.2 –0.1 –0.4
of the Volvo Group’s normal business cycle, with shorter duration in the
portfolio within Financial Services compared to Industrial Operations. Capital flow Interest flow

Financial Services measure the degree to which the duration of borrow­

4:10
ing and lending matches. The calculation of the matching degree excludes
equity, which amounted to 8% in Financial Services. At year-end 2019, 1 In addition to derivatives included in graph 4:10 there are also derivatives in
the Volvo Group related to financial liabilities with a positive fair value recog-
the degree of such matching was 99% (100) for the segment Financial nized as assets, which are expected to give a future capital flow of SEK 1.3
Services, which was in line with the Volvo Group’s policy. Volvo Group billion (2.9) and a future interest flow of SEK 0.2 billion (0.0).
Treasury has, for practical as well as business reasons, the mandate to
mismatch their portfolio for Financial Services between a matching ratio
of 80–120%. At year-end 2019, the matching ratio was 95% (93). Any
gains or losses from the mismatch impact the segment Group functions &
other within industrial Operations.

OTHER PRICE RISKS

OTHER PRICE RISKS POLICY

Commodity risks
Commodity risk refers to the risk that changed commodity prices will
affect the consolidated earnings within the Volvo Group. Procurement of
commodities such as steel, precious metals and electricity are made in the
Volvo Group on a regular basis where prices are set in the global markets.
Changes in commodity prices are included in the product cost calculation.
Increased commodity prices are therefore reflected in the sales price of
the Volvo Group’s final products. Purchasing agreements with commodity
suppliers may also be long-term in nature or structured in a way to
decrease the volatility in commodity prices.

123
 GROUP PERFORMANCE 2019
5 INVESTMENTS IN JOINT VENTURES, ASSOCIATED COMPANIES
AND OTHER SHARES AND PARTICIPATIONS
ACCOUNTING POLICY
Subsidiaries
The Volvo Group has production facilities in 18 countries and sales of
products in more than 190 markets, which means that the Volvo Group
has subsidiaries in many parts of the world. A subsidiary is defined as an
entity controlled by the Volvo Group. A subsidiary is controlled when the
parent company has power over the investee, exposes over or hold rights
to variable returns from its involvement with the investee and holds the
ability to use its power over the investee to affect the amount of the inves-
tor’s return. Most of the Volvo Group’s subsidiaries are 100% owned and
are therefore considered to be controlled by the Volvo Group. For some
subsidiaries there are restrictions on the Volvo Group’s ability to access or
use cash or cash equivalents from these subsidiaries.
Read more in Note 11 ­Non-controlling interest.
 ead more in Note 13 Investments in shares and participations in
R
the parent company about the composition of the Volvo Group.
Read more in Note 18 Cash and cash equivalents.
Joint ventures
Joint ventures are companies over which the Volvo Group has controlling
influence together with one or more external parties. Joint ventures are
recognized by applying equity method accounting. The Volvo Group has
holdings in a few joint ventures with VE Commercial Vehicles, Ltd.,
(VECV) being the significant holding. The investment in VECV is of a busi-
ness related nature and aims at strengthening the Volvo Group’s position
in India. VECV is included in the Trucks segment.
Associated companies
Associated companies are companies in which the Volvo Group has a sig-
nificant influence. A strong indication of such influence is when the
Group’s holding is at least 20% but less than 50% of the voting rights.
Holdings in associated companies are recognized in accordance with the
equity method accounting. The ownership in the Chinese automotive
manufacturer Dongfeng Commercial Vehicles Co., Ltd (DFCV) is classi-
fied as an associated company and is included in the Trucks segment. The
Volvo Group reduced their shares in subsidiary WirelessCar during 2019
and the ownership is now classified as an associated company.
124
NOTES
Equity method
The Volvo Group’s share of the companies’ income/loss recognized
according to the equity method is included in the Volvo Group’s income
statement as income/loss from investments in joint ventures and associ-
ated companies. Where appropriate, the income has been reduced by
depreciation of surplus values and the effect of applying different account-
ing policies has been taken into account. Income from companies recog-
nized in accordance with the equity method is included in operating
income since the Volvo Group’s investments are business related in
nature. For practical reasons, some of the associated companies are
included in the consolidated financial statements with a certain time lag,
normally up to one quarter. Dividends from joint ventures and associated
companies are not included in the consolidated income. The carrying
amount of investments in joint ventures and associated companies are
affected by the Volvo Group’s share of the company’s net income, less
depreciation of surplus values and dividends received. Investments in
joint ventures and associated companies are also affected by the Volvo
Group’s share of the company’s other comprehensive income and by the
translation difference from translating the company’s equity in the consol-
idation of the Volvo Group. When applying the equity method and associ-
ates or joint ventures recognize losses, additional impairment losses
might be recognized given any indication of impairment. For instance a
significant or prolonged decline in the fair value of the shares is an indica-
tion of impairment. However, investments accounted for in accordance
with the equity method cannot amount to a negative carrying value and
losses are therefore not adjusted for if the holding is of a negative amount.
Additional losses are provided for to the extent that the Volvo Group has
incurred legal or constructive obligations to make payments on behalf of
the joint venture or the associated company.
Other shares and participations
Other shares and participations recognizes holding of shares in which the
Volvo Group does not hold a significant influence. This generally means
that the Volvo Group’s holding of shares corresponds to less than 20% of
the voting rights. Listed shares are recognized at fair value through other
comprehensive income since the shares are not held for trading. For
unlisted shares and participations, a fair value cannot be reasonably
measured, hence these are measured at amortized cost. Earned or paid
interest attributable to these assets is recognized in the income state-
ment as part of net financial items, in accordance with the effective inter-
est method. Dividends received attributable to these assets are recog-
nized as income from other investments within operating income.

Read more in Note 30 Financial instruments, regarding classification and
valuation of financial instruments.
 GROUP PERFORMANCE 2019 NOTES

Joint ventures
The Volvo Group's investments in joint ventures are listed below.

Investments in joint ventures Dec 31, 2019 Dec 31, 2019 Dec 31, 2018 Dec 31, 2018
Percentage holding Carrying value Percentage holding Carrying value

VE Commercial Vehicles, Ltd., (VECV)¹ 45.6 2,854 45.6 2,715

Other holdings in joint ventures² 1 –
Investments in joint ventures 2,855 2,715

5:1
1 V E Commercial Vehicles, Ltd., is considered to be a joint venture as the Volvo Group and Eicher Motors Ltd. have signed an agreement which states
that common agreement is needed for important matters related to the governance of VECV.
2O  ther holdings in joint ventures include investments in SOPROVI Algérie SPA and PT UD Astra Motor Indonesia. Part of other holdings in joint ventures have
been reclassified to assets held for sale. Read more in Note 3 Acquisitions and divestments of shares in subsidiaries.

The following tables present summarized financial information for the Volvo Group’s joint ventures:

Summarized income statements 2019 2018

Other joint Other joint
VECV ventures Total VECV ventures Total

Net sales 12,853 232 13,084 14,764 – 14,764

Operating income  1
381 –6 375 851 – 851
Interest income and similar credits 96 1 97 106 – 106
Interest expense and similar charges –35 0 –35 –24 – –24
Other financial income and expenses –2 – –2 –1 – –1
Income taxes –152 1 –151 –301 – –301
Income for the period2 287 –3 284 631 – 631

Other comprehensive income 3

–5 – –5 0 – 0
Total comprehensive income 282 –3 280 631 – 631

5:2
1 Depreciation and amortization of SEK 503 M (423) are included within operating income.
2 Income for the period in joint ventures includes depreciation of surplus values.
3 Including the Volvo Group’s share of OCI related to joint ventures. Translation differences from translating joint ventures’ equity in the Volvo Group are excluded.

Summarized balance sheets Dec 31, 2019 Dec 31, 2018

Other joint Other joint
VECV ventures Total VECV  ventures Total

Non-current assets 6,421 13 6,434 5,314 – 5,314

Marketable securities, cash and cash
equivalents 1,249 16 1,266 1,229 – 1,229
Other current assets 4,541 152 4,693 6,133 – 6,133
Total assets  12,211 181 12,393 12,676 – 12,676

Equity1 6,259 77 6,337 5,948 – 5,948

Non-current financial liabilities 91 – 91 13 – 13
Other non-current liabilities 354 – 354 466 – 466
Current financial liabilities 3,475 75 3,550 3,795 – 3,795
Other current liabilities 2,032 29 2,061 2,454 – 2,454
Total equity and liabilities  12,211 181 12,393 12,676 – 12,676

5:3
1 Including the translation differences from translating joint ventures’ equity in the Volvo Group.

Net financial position for the joint ventures (excluding post-employment benefits) amounted to SEK 974 M (888) as of December 31, 2019.
As of December 31, 2019, the Volvo Group’s share of contingent liabilities in its joint ventures amounted to SEK 110 M (143). Dividend received
from VECV amounted to SEK 78 M (70).
125
 GROUP PERFORMANCE 2019 NOTES

Associated companies
The Volvo Group’s investments in associated companies are listed below.

Investments in associated companies Dec 31, 2019 Dec 31, 2019 Dec 31, 2018 Dec 31, 2018
Percentage holding Carrying value Percentage holding Carrying value

Dongfeng Commercial Vehicles Co., Ltd (DFCV) 45.0 9,349 45.0 7,973
Other holdings in associated companies1 751 447
Investments in associated companies 10,100 8,420

5:4
1 Other holdings in associated companies include the investment in two dealers in Japan, Blue Chip Jet II HB and WirelessCar.

The following tables present summarized financial information for the Volvo Group’s associated companies:

Summarized income ­statements 2019 2018

Other associated Other associated
DFCV companies Total DFCV companies Total

Net sales 61,210 3,431 64,641 53,261 3,993 57,254

Operating income 3,272 53 3,325 2,367 114 2,481
Income for the period1 3,038 38 3,076 1,867 109 1,976

Other comprehensive income2 2 – 2 0 0 0

Total comprehensive income 3,040 38 3,078 1,867 109 1,976

5:5
1 Income for the period in associated companies includes depreciation/amortization of surplus values and internal transactions.
2 Including the Volvo Group’s share of other comprehensive income related to associated companies. Translation differences from translating the associated
companies’ equity in the Volvo Group are excluded.

Summarized balance sheets Dec 31, 2019 Dec 31, 2018

Other associated Other associated
DFCV companies Total DFCV companies Total

Non-current assets 20,681 1,159 21,841 18,173 1,668 19,841

Current assets 49,349 2,195 51,544 36,540 3,807 40,347
Total assets 70,030 3,355 73,385 54,713 5,475 60,188

Equity 20,039 1,368 21,407 17,997 2,199 20,196

Non-current liabilities 4,986 331 5,317 2,367 491 2,858
Current liabilities 45,005 1,656 46,660 34,350 2,784 37,134
Total equity and liabilities 70,030 3,355 73,385 54,713 5,475 60,188

5:6

Dividend of SEK 392 M (336) was received from DFCV during 2019.

126
 GROUP PERFORMANCE 2019 NOTES

Other shares and participations

The carrying amount of the Volvo Group’s holding of shares and participa-
Income/loss from investments in joint tions in other companies as of December 31, 2019, is disclosed in the
ventures and associated companies 2019 2018
table below.
Income/loss joint ventures 
Read more in Note 30 Financial Instruments, regarding classification and
VECV 135 286 valuation of financial instruments.
Other companies –2 –
Subtotal 133 286

Income/loss associated companies Holding of shares in listed Dec 31, 2019 Dec 31, 2018
DFCV 1 1,692 840 and non-listed companies Carrying value Carrying value
Other companies 35 1
Holdings in Japanese companies 0 495
Subtotal 1,727 842
Holdings in other listed
Revaluation, write-down and gain on companies 0 0
divestment of shares associated companies Holding of shares in
Other companies2 – 821 listed companies1 0 496
Subtotal – 821 Holding of shares in non-listed
I/S  Income/loss from investments in joint companies 158 244
ventures and associated companies3 1,860 1,948 B/S   Other shares and
participations 158 740
5:7

1 Income/loss includes an internal profit elimination of net SEK 26 M (0) ­and 5:8
an adjustment to Volvo Group Accounting policies of SEK 334 M (0). 1 Changes in fair value is measured through other comprehensive income and
2 During 2018, the Volvo Group divested the share of ownership in Inner amounts to SEK 48 M (34).
Mongolia North Hauler Joint Stock Co., Ltd. with a gain of SEK 818 M.
3 Income/loss from investments in joint ventures include the Volvo Group’s
share of depreciation of ­surplus values of SEK 0 M (12) and associated
companies include depreciation of surplus values of SEK 39 M (39).

127
 GROUP PERFORMANCE 2019 NOTES

6 SEGMENT REPORTING

ACCOUNTING POLICY
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief oper-
ating decision-maker, who is responsible for allocating resources and
assessing financial performance of the operating segments, has been
identified as the Group Executive Board that makes strategic decisions.
The Volvo Group comprises nine business areas: Volvo Trucks, Mack
Trucks, Renault Trucks, UD Trucks & JVs, Volvo Construction Equipment,
Volvo Buses, Volvo Penta, Arquus and Volvo Financial S ­ ervices.
Each business area, except for the truck brands and Arquus, is seen as a
separate segment. Arquus is part of the segment Group functions & Other.
The truck brands are seen as one segment since the operations are highly
integrated, strategic allocation of resources are done to the total segment
and the independence for each truck brand are lower compared to other
segments. As from January 1, 2020 a new business area, Volvo Autono-
mous Solutions, has been created and the financial result will be reported
as part of the Trucks segment.
The Volvo Group has shared operations in both the Trucks segment and
in the segment Group functions & Other. Shared operations for produc-
tion, development and logistics for powertrain and parts are included in
the Trucks segment. Volvo Group IT and Volvo Group Real Estate are seen
as business support functions and are part of Group functions & Other.
The cost of these operations is shared between the different business
areas based on utilization according to principles set by the Volvo Group.

Con­ Group func-

struction Volvo tions & Other Industrial Financial Elimina- Volvo
2019 Trucks Equipment Buses Penta incl. elim. Operations Services tions Group

Net sales, external

customers 275,178 88,400 30,083 12,732 11,005 417,398 14,590 – 431,987
Net sales, internal 1,469 205 936 555 –2,202 964 281 –1,252 –7
I/S   Net sales  276,647 88,606 31,019 13,287 8,803 418,361 14,870 –1,252 431,980

Expenses  –246,937 –76,695 –29,690 –11,415 –8,713 –373,450 –12,104 1,245 –384,308
I/S   Income from
­investments in joint
ventures and associ-
ated companies 1,841 – 8 4 6 1,859 – – 1,859
I/S Operating
income 31,552 11,910 1,337 1,876 96 46,771 2,766 –6 49,531
I/S  Interest income
and similar credits 320 – 0 320
I/S  Interest expense
and similar charges –1,673 0 0 –1,674
I/S  Other financial
income and expense –1,346 – – –1,345
I/S   Income after financial items 44,071 2,767 –6 46,832

Other segment information

Depreciation, amorti-
zation and impairment –13,905 –2,213 –752 –427 1,500 –15,797 –4, 788 – –20,585
Restructuring costs –176 1 –28 – –1 –204 – – –204
Gains/losses from
­divestments – – –5 – 1,639 1,634 – – 1,634

Investments in
in-/tangible assets 10,574 1,317 434 538 1,061 13,924 10,008 – 23,932
B/S   Investments in
joint ­ventures and
associated ­companies 12,549 – 75 35 297 12,955 – – 12,955
B/S   Assets held
for sale1 28,427 4,345 – 32,773
B/S   Liabilities held
for sale1 –5,927 –4,486 – –10,413

6:1

128
 GROUP PERFORMANCE 2019 NOTES

Con­ Group func-

struction Volvo tions & Other Industrial Financial Elimina- Volvo
2018 Trucks Equipment Buses Penta incl. elim. Operations Services tions Group

Net sales, external

customers 249,815 84,061 24,941 13,267 5,945 378,030 12,804 – 390,834
Net sales, internal 542 176 885 474 –1,788 289 266 –555 –
I/S   Net sales  250,358 84,238 25,826 13,741 4,157 378,320 13,070 –555 390,834

Expenses  –231,944 –72,935 –25,250 –11,401 –6,671 –348,201 –10,659 555 –358,305
I/S   Income from
­investments in joint
ventures and associ-
ated companies 1,128 821 –1 2 –1 1,948 – – 1,948
I/S Operating
income 19,541 12,125 575 2,341 –2,515 32,067 2,411 – 34,478
I/S  Interest income
and similar credits 199 – – 199
I/S   Interest
expense and
similar charges –1,658 0 – –1,658
I/S  Other financial
income and expense –870 – – –870
I/S   Income after financial items 29,738 2,411 – 32,148

Other segment information

Depreciation,
amortization and
impairment –12,840 –1,858 –505 –250 1,662 –13,792 –4,648 – –18,440
Restructuring costs 1 10 – – – 11 –41 – –29
Gains/losses from
­divestments 4 – – – 2 6 – – 6

Investments in
in-/tangible assets 8,006 832 347 527 1,021 10,733 10,184 – 20,916
B/S   Investments in
joint ­ventures and
associated companies 10,966 – 60 32 77 11,135 – – 11,135
B/S  Assets
held for sale1 203 – – 203
B/S  Liabilities
held for sale1 – – – –

6:2
1 Reclassifications of assets and liabilities has been made to assets and liabilities held for sale.
Read more in Note 3 Acquisitions and divestments of shares in subsidiaries about assets held for sale.

Reporting by Non-current
market Net sales assets2
2019 2018 2019 2018

Europe 163,748 160,591 77,047 70,953

of which Sweden 10,208 9,866 25,315 25,665
of which France 33,955 31,195 11,661 12,111
of which the UK 18,729 18,598 9,509 5,441
North America 131,310 106,948 21,151 19,689
of which USA 103,166 84,639 19,231 17,966
South America 31,222 21,138 2,991 2,710 1 Reclassifications of assets and liabilities has been made to assets and
liabilities held for sale.
of which Brazil 20,427 12,582 2,460 2,264
Read more in Note 3 Acquisitions and divestments of shares in subsid-
Asia 79,951 76,976 5,990 17,215 iaries about assets held for sale.
of which China 29,535 27,214 2,259 1,888 2 Non-current assets include tangible and intangible assets excluding
of which Japan 20,905 18,227 1741 10,782 ­goodwill.
Other markets 25,750 25,182 3,331 2,178
The reporting of net sales by market is based on where the delivery of
I/S   B/S  Total 431,980 390,834 110,510 112,745
the goods or services took place.
6:3

129
 GROUP PERFORMANCE 2019
7 REVENUE
ACCOUNTING POLICY
The recognized net sales in Industrial Operations pertain to revenues from
sales of vehicles and services. Revenue from vehicles and services are
recognized when control has been transferred from Volvo Group to the
customer. Control refers to the customers’ ability to use vehicles or ser-
vices in its operations and to obtain the associated cash flow related to
the use. Vehicles and services are sold separately or as a combined offer.
In combined offers where the vehicle and services are separable from
each other and the customer can benefit from the vehicle and the service
independently, the transaction price is allocated between vehicles and
services based on stand-alone selling price according to price lists.
The recognized net sales in Financial Services pertain to interest
income related to finance leases and installment credits as well as income
from operating lease contracts. Interest income are recognized during the
underlying contract period and income from operating leasing is recog-
nized over the leasing period.
Vehicles
Vehicles include sales of new vehicles, machines and engines as well as
sales of used vehicles, machines, trailers, superstructures and special
vehicles. A standard contractual warranty is included as part of the sales,
read more in note 21 Other provisions about product warranty. The cus-
tomer can pay for the vehicle at the point of sale or defer the payment by
entering into agreements such as installment credits and finance lease.
Revenue is recognized when the control of the vehicle has been trans-
ferred to the customer, normally at one point in time which is when the
vehicle has been delivered to the customer. The value of rebates, returns
and variable sales price have been considered as part of the revenue rec-
ognition.
If the sale of the vehicle is combined with a residual value commitment
(buybacks and tradebacks) the criterion of transferring control is based on
if the customer has a significant economic incentive to exercise the option
to return the vehicle or not. A significant economic incentive exists if the
repurchase price is higher than the assessed fair market value i.e. net real-
izable value at the end of the residual value commitment period, or if the
historical returns indicate that it is probable that the customer will return
the vehicle at the end of the commitment period. Thus, the control has not
been transferred and the sales transaction is recognized as an operating
lease transaction. The revenue and expense are recognized over the resid-
ual value commitment period in the income statement. Assets under
operating leases, a residual value liability, and a deferred lease income are
recognized in the balance sheet. The asset is depreciated over the com-
mitment period and the deferred lease income is recognized as revenue
over the same period. The residual value liability amount remains
unchanged until the end of the commitment period. If the vehicle is
returned at the end of the commitment period, the residual value liability
is paid to the customer and the vehicle is reclassified from assets under
operating lease to inventory.
 ead more in Note 14 Leasing about lease income on assets under
R method is used and revenue is recognized when it is highly probable that
operating lease.
If the customer is not considered to have a significant economic incentive
to return the vehicle, the sales transaction is recognized in accordance
with the right of return model. Revenue corresponding to the sales amount
130
NOTES
less the buyback amount is recognized at the initial sale, as well as a pro-
portionate share of cost of goods sold. The remaining revenue is recog-
nized as a refund liability and the remaining cost of goods sold as a right of
return asset during the commitment period. If the vehicle is not returned
the refund liability is recognized as revenue and the right of return asset is
recognized as cost of goods sold at the end of the commitment period.
Services
Services include sale of spare parts, maintenance services, repairs,
extended coverage and other aftermarket products. The control of the
service has been transferred to the customer when the Volvo Group incurs
the associated cost to deliver the service and the customer can benefit
from the use of the delivered services. For spare parts, revenue is normally
recognized at one point time, which is when it is delivered to the cus-
tomer. For maintenance services and other aftermarket products, revenue
is recognized over time, i.e. normally during the contract period. When
payment for maintenance contracts is received in advance, the payment is
recognized as a contract liability.
Services also includes sales in Financial Services related to finance
lease, installment credits and operating leases. During 2019, revenue
from Financial Services operations amounted to SEK 14,870 M (13,070).
 ead more in Note 6 Segment reporting regarding net sales by
R
segment and market.
 ead more in Note 14 Leasing about lease income on assets under
R
operating lease and finance income om customer-financing receivables.
SOURCE OF ESTIMATION UNCERTAINT Y
AND CRITICAL JUDGMENTS
Sales with residual value commitments
When the Volvo Group enters into sales transactions of vehicles with
residual value commitments (buybacks and tradebacks) the judgment
whether control has been transferred from Volvo Group to the customer
and at what point in time revenue shall be recognized is critical. The judg-
ment made is when a significant economic incentive exists or not for the
customer to return the vehicle at the end of the commitment period. The
assessment of significant economic incentive is performed at the incep-
tion of the contract and the outcome at the end of the commitment period
can differ from the initial assessment. Factors that are considered and
requires judgment is the assessed fair market value i.e. net realizable
value at the end of the residual value commitment period and historical
returns.

Read more in Note 13 Tangible assets for a description of residual value
risks and the assessment of fair market value.
Variable sales price
In some sales transactions, the sales price is variable such as residual
value guarantees. In assessing the variable sales price, the expected value
a reversal will not occur. Both the expected value method and the assess-
ment of highly probable requires judgments to be able to make estimates.
The estimates are made at the contract start with continuous assessment
at each reporting period.
 GROUP PERFORMANCE 2019 NOTES

Disaggregation of
Group functions
revenue Construction Volvo & Other Industrial Financial Elimina- Volvo
2019 Trucks Equipment Buses Penta incl. elim Operations Services tions Group

Net sales per

product group
Vehicles 213,071 76,506 25,600 9,698 7,682 332,558 – –1,170 331,388
Services 63,575 12,099 5,419 3,588 1,122 85,804 14,870 –81 100,593
Net sales 276,647 88,606 31,019 13,287 8,803 418,361 14,870 –1,252 431,980

Net sales per

geographical region
Europe 112,125 30,300 7,369 6,671 2,521 158,985 6,279 –1,516 163,748
North America 85,731 17,404 15,543 3,180 3,996 125,855 5,534 –78 131,310
South America 23,753 2,532 3,281 319 –147 29,739 1,555 –72 31,221
Asia 37,610 33,932 2,617 2,439 2,315 78,914 1,010 26 79,951
Africa and Oceania 17,427 4,437 2,209 679 117 24,869 492 389 25,750
Net sales 276,647 88,606 31,019 13,287 8,803 418,361 14,870 –1,252 431,980

Timing of revenue
recognition
Revenue of vehicles and
services recognized at
the point of delivery 256,923 86,819 30,355 13,287 6,749 394,132 – 95 394,228
Revenue of vehicles and
services recognized over
contract period 19,725 1,786 664 0 2,054 24,230 14,870 –1,347 37,752
Net sales 276,647 88,606 31,019 13,287 8,803 418,361 14,870 –1,252 431,980

7:1

Disaggregation of
Group functions
revenue Construction Volvo & Other Industrial Financial Elimina- Volvo
2018 Trucks Equipment Buses Penta incl. elim Operations Services tions Group

Net sales per

product group
Vehicles 192,157 72,797 20,943 10,410 3,049 299,356 0 –459 298,897
Services 58,201 11,441 4,883 3,330 1,108 78,963 13,070 –96 91,937
Net sales 250,358 84,238 25,826 13,741 4,157 378,320 13,070 –555 390,834

Net sales per

geographical region
Europe 111,237 27,291 7,036 7,487 2,089 155,140 6,063 –613 160,591
North America 70,233 15,575 13,244 2,912 419 102,383 4,600 –35 106,948
South America 16,021 2,304 1,393 299 –102 19,914 1,276 –52 21,138
Asia 36,664 33,781 2,094 2,443 1,195 76,177 800 –1 76,976
Africa and Oceania 16,203 5,287 2,060 599 556 24,705 332 145 25,182
Net sales 250,358 84,238 25,826 13,741 4,157 378,320 13,070 –555 390,834

Timing of revenue
recognition
Revenue of vehicles and
services recognized at
the point of delivery 232,876 82,716 25,300 13,741 2,366 356,999 0 –389 356,610
Revenue of vehicles and
services recognized over
contract period 17,481 1,522 526 – 1,791 21,320 13,070 –166 34,224
Net sales 250,358 84,238 25,826 13,741 4,157 378,320 13,070 –555 390,834

7:2

131
 GROUP PERFORMANCE 2019 NOTES

Contract and right of return assets Of which due Of which due

Dec 31, 2019 within 12 months after 12 months Dec 31, 2018 Dec 31, 2017

Contract assets 6,423 4,313 2,110 3,748 2,585

Right of return assets 1,280 157 1,123 1,655 1,801
Parts return assets 165 119 46 48 181
Total 7,868 4,589 3,279 5,451 4,567

7:3

Contract assets are recognized within other receivables and include reve- Right of return assets and parts return assets represents the product cost
nue that has been recognized but not yet invoiced for work performed. for the assets that might be returned to the Volvo Group.

Contract and refund l­ iabilities Of which due Of which due

Dec 31, 2019 within 12 months after 12 months Dec 31, 2018 Dec 31, 2017

Contract liabilities
Deferred service revenue 16,419 3,371 13,049 14,270 12,229
Advances from customers 7,707 5,493 2,215 6,526 4,986
Other deferred income 1,427 1,184 243 1,083 1,457
 ccrued expenses for dealer bonuses
A
and rebates 6,659 6,647 12 6,223 5,772
Refund liabilities 1,726 461 1,265 1,912 2,332
Total 33,938 17,155 16,784 30,014 26,775

7:4

Contract liabilities are recognized within other liabilities and include
advance payments received from customers, e.g. advance payments for
service contracts and extended coverage, for which revenue is recognized
when the service is provided. Refund liabilities related to the right to return
products and residual value guarantees are included with an amount that
is expected to be paid to the customer if the vehicle or spare part is
returned. In service contracts, the revenue expected to be recognized
over the remaining term of the contract for services not yet delivered
amounted to SEK 14,207M (19,408) as of December 31, 2019. Approxi-
mately 31% are expected to be recognized as revenue during 2020 and
the remaining 69% as revenue during 2021–2023. The change in con-
tract and refund liabilities are due to increased sales of service contract
and extended coverage. During 2019, revenue has been recognized with
SEK 9,480 M (13,091) that was included in the ­contract liabilities at the
beginning of the period.

8 OTHER OPERATING INCOME AND EXPENSES

1 Including capital gain on sale of the majority of Volvo Group’s holding of

shares in WirelessCar of SEK 1,621 M
Other operating income and expense 2019 2018  Read more in Note 3 Acquisitions and divestments of shares in
­subsidiaries, about gains/losses on divestment of Group companies.
Gains/losses on divestment 2 Read more in Note 15 Customer-financing receivables.
of Group companies1 1,634 6
3 Read more in Note 16 Receivables.
Change in allowances and write-offs for
4 Including costs for legal advisors for claims related to the EU antitrust
doubtful customer-financing receivables2 –729 –538
investigation (2016).
Change in allowances and write-offs for
5 Includes mainly capital gains from sale of real estate of SEK 707 M
other doubtful receivables3 –204 –179
Damages and litigations 4
–673 –687 
Read more in Note 4 Goals and policies in financial risk management
Restructuring costs –204 –29 ­regarding the company’s management of credit risk and credit reserves.
Volvo profit sharing program –728 –846
Other income and expenses5 683 0
I/S   Total –221 –2,273

8:1

132
 GROUP PERFORMANCE 2019 NOTES

9 OTHER FINANCIAL INCOME

AND EXPENSES
10 INCOME TAXES

ACCOUNTING POLICY
ACCOUNTING POLICY
Income tax for the period includes current and deferred taxes. Current
In Other financial income and expenses unrealized revaluation on deriva- taxes are calculated on the basis of the tax regulations prevailing in the
tives used to hedge interest rate ­exposure as well as realized result and countries where the group companies have operations.
unrealized revaluation on derivatives used to hedge future cash flow expo- Deferred taxes are recognized on differences that arise between the tax-
sure in foreign currency are recognized. The derivatives are recognized at able value and carrying value of assets and liabilities as well as on tax-loss
fair value through the income statement and no hedge accounting is carryforwards. Deferred tax assets are recognized to the extent it is proba-
applied. The unrealized revaluation on derivatives used to hedge interest ble that they will be utilized against future taxable profits.
rate exposure was mainly related to the debt portfolio within ­Industrial Deferred tax liabilities related to temporary differences on investments
­Operations and customer-financing portfolio within Financial Services. in subsidiaries, joint ventures and associated companies are recognized in
the balance sheet except when the Volvo Group controls the timing of the
Read more in Note 1 Accounting ­policies about receivables and ­liabilities
in foreign currency. reversal of the temporary difference related to accumulated undistributed

Read more in Note 30 Financial Instruments regarding the accounting
earnings and it is probable that a reversal will not be done in the foreseea-
­policy for financial assets at fair value through the income statement. ble future.
Tax laws in Sweden and certain other countries allow companies to defer
payment of taxes through allocations to untaxed reserves. In the Volvo
Group financial statements, untaxed reserves give rise to temporary differ-
ences which are recognized as deferred tax liabilities.
Other financial income and expense 2019 2018
Tax liabilities are recognized for income tax charges that are probable as
Unrealized revaluation of derivatives a result of identified risks. Hence, when it is probable that the taxation
used to hedge i­nterest rate exposure –439 –185 authority or court will not accept an uncertain income tax treatment under
Realized result and unrealized revalua- tax law, adjustments of the tax liability are made for the estimated out-
tion on derivatives used to hedge future come. Tax claims for which no adjustment of the tax liability is c ­ onsidered
cash flow ­exposure in foreign currency –452 –384
required are generally reported as contingent liabilities.
Financial instruments at fair value
through income statement –892 –570 Read more in Note 24 Contingent Liabilities.

Exchange rate gains and losses

on ­f inancial assets and liabilities
Financial income and expenses
related to taxes
Costs for Treasury function,
credit ­facilities, etc.
I/S  Total1
1 Other financial income and expense attributable to financial instruments
amounted to SEK –978 M (–710). The amount is specified in note 30
Financial Instruments in table 30:3.
–86 –140
–103 64 SOURCE OF ESTIMATION UNCERTAINT Y
AND CRITICAL JUDGMENTS
–265 –224
–1,345 –870 Deferred taxes
The Volvo Group recognizes deferred tax assets related to substantial tax-
9:1 loss carryforwards that are assessed as being probable to be utilized due to
sufficient taxable profits generated in the coming years. The judgment is
based on the possibility to offset tax assets and tax liabilities and that a
significant part of tax-loss carryforwards are related to countries with long
or indefinite periods of utilization. In order to determine the probability of
utilization of such tax-loss carryforwards, business plans are used.
Valuation allowances are recognized for deferred tax assets that are not
expected to be realized based on current forecast. In the event that actual
results differ from the forecast or if the forecast for future periods is
adjusted, changes in the valuation allowance may be required. This could
have a ­significant impact on the financial position and the income for the
period.

Uncertainty over income tax treatments and claims

The Volvo Group regularly evaluates income tax positions to determine if a
tax liability or a contingent liability shall be recognized. The judgment is
based on several factors, such as changes in facts and circumstances, the
progress of the case and experience in similar cases. The actual outcome of
income tax positions may deviate from the expected outcome and materi-
ally affect future financial statements.

133
 GROUP PERFORMANCE 2019 NOTES

Distribution of Income taxes 2019 2018 Specification of deferred Dec 31, Dec 31,
tax assets and liabilities 2019 2018
Current taxes relating to the period –9,809 –9,028
Adjustment of current Deferred tax assets:
taxes for prior ­periods 1,016 184 Unused tax-loss carryforwards 2,547 2,560
Deferred taxes originated or Other unused tax credits 78 81
reversed during the period –981 1,921
Intercompany profit in inventories 1,570 1,686
Remeasurements of deferred tax assets –563 138
Allowance for inventory obsolescence 684 663
I/S   Total income taxes –10,337 –6,785 Valuation allowance for
doubtful ­receivables 1,130 1,118
10:1 Provisions for warranties1 3,756 4,493
Provisions for residual value risks 312 189
The Swedish corporate income tax rate amounted to 21% (22) in 2019.
Lease liabilities2 1,422 –
The table below explains the major reasons for the difference between the
Provisions for post-
Swedish corporate income tax rate and the Volvo Group’s effective tax
employment ­benefits 4,511 3,801
rate, based on income after financial items.
Provisions for restructuring measures 39 17
Land 1,290 1,275
Other deductible temporary
­differences 6,287 5,910
Reconciliation of effective tax rate, % 2019 2018
Deferred tax assets before ­deduction
Swedish corporate income tax rate 21 22 for valuation allowance 23,626 21,793
Difference between corporate tax
Valuation allowance –689 –714
rate in ­Sweden and other countries 2 1
Deferred tax assets after deduction
Non-taxable income –4 –3 for valuation allowance 22,937 21,080
Non-deductible expenses 0 1
Current taxes related to prior years 0 –1 Netting of deferred tax
assets and liabilities –9,695 –7,574
Remeasurement of deferred taxes 2 –1
B/S   Deferred tax assets, net 13,242 13,505
Other differences 0 1
Effective tax rate for the Volvo Group 22 21 Deferred tax liabilities:
Accelerated depreciation
10:2 on­ ­property, plant and equipment 1,914 1,804
Accelerated depreciation
The effective tax rate for the Volvo Group, as of December 31, 2019, was on leasing assets 2,808 2,851
impacted mainly by the non-taxable capital gain related to the divestment Right-of-use assets, leased2 1,376 –
of the majority of the Volvo Group’s holding shares in WirelessCar as well as LIFO valuation of inventories 361 343
tax settlements. Capitalized product and
software development 2,570 2,363
Adjustment to fair value at corporate
­acquisitions/divestments 38 41
Untaxed reserves 2,239 1,382
Provisions for post-
employment benefits 24 81
Other taxable temporary ­differences 2,713 2,837
Deferred tax liabilities 14,043 11,702

Netting of deferred tax

assets and liabilities –9,700 –7,574
B/S   Deferred tax liabilities, net 4,343 4,128

Deferred tax assets and liabilities, net 3

8,899 9,377

10:3

1 Includes the tax impact of a provision made in 2018 of SEK 7 billion for
­estimated costs to address the issue of an emission control component.
Read more in Note 21 Other provisions.
2 Read more in Note 31 Changes in Volvo Group financial reporting 2019.
As from January 1, 2019 the Volvo Group applies IFRS 16 Leases.
3 T he deferred tax assets and liabilities are recognized in the balance sheet
partially on a net basis, after taking into account offsetting possibilities.
Deferred tax assets and liabilities have been measured at the tax rates that
are expected to be applied during the period when the asset is realized or
the ­liability is settled, according to the tax rates and tax regulations that
have been resolved or enacted at the balance sheet date.

134
 GROUP PERFORMANCE 2019 NOTES

11 NON-CONTROLLING INTEREST

The total valuation allowance for deferred tax assets amounted to SEK
689 M (714) as of December 31, 2019. Most of the allowance, SEK ACCOUNTING POLICY
530 M (583), consisted of allowance for unused tax-loss carry­forwards,
mainly related to Japan. Non-controlling interest is a limited ownership of shares and voting rights
As of December 31, 2019, the Volvo Group’s gross unused tax-loss in a subsidiary, thereby also limited rights to the subsidiary's equity.
carry­forwards amounted to SEK 9,243 M (9,088) pertaining to deferred Non-controlling interest equity is presented separately from the Parent
tax assets of SEK 2,547 M (2,560) recognized in the balance sheet. Company's equity. In acquisitions, non-controlling interests are valued
After deduction for valuation allowance, deferred tax assets attributable to either at fair value or to a proportionate share of the acquired company’s
unused tax-loss carry­forwards amounted to SEK 2,018 M (1,977) of which net assets. Ownership changes in non-controlling interests, not resulting
SEK 1,173 M (934) pertained to France and SEK 397 M (491) to Japan. in change of control, is recognized within equity.
The gross unused tax-loss carryforwards expired according to the
­following table.
The Volvo Group has a few non-wholly owned subsidiaries, of which one
is considered to be significant. Shandong Lingong Construction Machin-
ery Co. (Lingong), in China, has a non-controlling interest holding of 30%
Due date, unused tax-loss ­ Dec 31, Dec 31, of the shares and voting rights, which is considered significant for the
carryforwards gross 2019 2018 Volvo Group. During 2019, the profit allocated to the non-controlling
after 1 year 1,490 365 interest in Lingong amounted to SEK 614 M (464). The accumulated
after 2 years 430 1,677 amount allocated to the non-controlling interest within equity of Lingong
amounts to SEK 3,043 M (2,400).
after 3 years 415 394
The following table presents summarized financial information for
after 4 years 347 450
­Shandong Lingong Construction Machinery Co.
after 5 years 415 328
after 6 years or more 1 6,145 5,874
Total  9,243 9,088
Summarized income statement 2019 2018
10:4
Net sales 20,851 17,107
1 Tax-loss carryforwards with long or indefinite periods of utilization were
mainly related to France. Tax-loss carryforwards with indefinite periods of Operating income 2,358 1,738
utilization amounted to SEK 5,790 M (5,368) which corresponded to 63% Income for the period 2,046 1,548
(59) of the total unused tax-losses carryforward.
Other comprehensive income1 97 196
Total comprehensive income
for the period1 2,143 1,744
Changes in deferred tax assets
Dividends paid to non-controlling interest – –
and liabilities, net 2019 2018

Deferred tax assets and liabilities, 11:1

net, opening balance 9,377 6,777
Transition effect IFRS 91 – 129
Opening balance 9,377 6,906
Summarized balance sheet Dec 31, Dec 31,
Recognized in Income statement –1,544 2,059 2019 2018
Recognized in Other comprehensive
Non-current assets 3,334 2,978
income, whereof:
Marketable securities, cash
Remeasurements of defined-
and cash equivalents 5,239 3,648
benefit pension plans 807 –47
Current assets 13,325 11,328
Remeasurements of holdings of shares at
fair value –4 6 Total assets  21,898 17,953
Translation differences and other changes 263 453 Non-current liabilities 217 153
Deferred tax assets and liabilities, Current liabilities 11,536 9,798
net, as of December 31  8,899 9,377
Total liabilities 11,753 9,952
10:5
Equity attributable to:
1 The opening balance for 2018 is restated due to the implementation of Owners of AB Volvo1 7,101 5,601
IFRS 9. Non-controlling interest1 3,043 2,400

The cumulative amount of undistributed earnings in foreign subsidiaries, 11:2

which the Volvo Group currently intends to indefinitely reinvest outside
1 ­Includes exchange differences from translating equity in foreign
of Sweden and which no deferred income tax have been accounted for,
­subsidiaries in the Volvo Group.
amounted to SEK 30 billion (29) at year end. Undistributed earnings
­pertaining to countries where the dividends are not taxable are excluded.


Read more in Note 4 Goals and policies in financial risk management
about how the Volvo Group handles equity currency risk.

135
 GROUP PERFORMANCE 2019
12 INTANGIBLE ASSETS
ACCOUNTING POLICY
Volvo Group applies the cost method for recognition of intangible assets,
consisting of goodwill, capitalized product and software development
and other intangible assets.
Goodwill
Goodwill is recognized as an intangible asset with indefinite useful life.
For non-depreciable assets such as goodwill, impairment tests are per-
formed annually, as well as if there are indications of impairments during
the year. Goodwill is allocated and tested at the level of cash-generating
units which are identified as the Volvo Group’s operating segments. If the
carrying amount of the tested cash-generating unit exceeds the calcu-
lated recoverable amount, an impairment loss is recognized for the differ-
ence. The recoverable amount for a cash-generating unit is determined on
the basis of value in use. The Volvo Group’s valuation model is based on a
discounted cash flow model, with a forecast period of four years. The val-
uation is based on a business plan which is an integral part of the Volvo
Group’s financial planning process and represents management’s best
estimate of the development of the Group’s operations. Assumption of
2% (2) long-term market growth beyond the forecast period and the
Group’s expected performance in relation to this environment is a basis
for the valuation. In the model, the Volvo Group is expected to maintain
stable capital efficiency over time. Other parameters considered in the
calculation are operating income, mix of products and services, expenses
and level of capital expenditures. The Volvo Group uses a discount rate at
10% (12) before tax for 2019.
In 2019, the calculated value of Volvo Group’s operations exceeded the
carrying amount for all operating segments, thus no impairment was rec-
ognized. The Volvo Group has also analyzed whether a negative adjust-
ment of 1% on the used assumptions would result in impairment for
goodwill, however none of the operating segments would be impaired as
a result of this analysis. The operating parameters applied in the valuation
are based on management’s strategy and could indicate higher value than
historical performance for each operating segment. Furthermore, the
Volvo Group is operating in a cyclical industry why performance could
vary over time.
The surplus values differ between the operating segments why they are
sensitive to changes in the assumptions described above to a varying
degree. Therefore, the Volvo Group continuously follows the performance
of the operating segments whose surplus value is dependent on the fulfill-
ment of the Volvo Group’s assessments. Instability in the recovery of the
market and volatility in interest and currency rates may lead to indications
of a need for impairment. The most important factors for the future oper-
ations of the Volvo Group are described in the Volvo Group operating seg-
ment section, as well as in the Risk management section.
Research and development
Expenditures for the development of new products and software are recog-
nized as intangible assets if such expenditures, with a high degree of cer-
tainty, will result in future financial benefits for the company. Intangible
assets is amortized over the estimated useful life of the assets.
The rules require stringent criteria to be met for these development
expenditures to be recognized as assets. For example, it must be possible
to prove the technical functionality of a new product or software prior to its
development expenditure being recognized as an asset. In normal cases,
this means that expenditures are capitalized only during the industrializa-
tion phase of a product development project. Other research and develop-
ment costs are recognized in the income statement as incurred.
136
NOTES
The Volvo Group has developed a process for conducting product
development projects, which has six phases focused on separate parts of
the project. Every phase starts and ends with a reconciliation point,
known as a gate, for which the criteria must be met for the project’s deci-
sion making committee to allow the project to progress to the next phase.
During the industrialization phase, the industrial system is prepared for
serial production and the product is launched. A corresponding process is
developed for software development.
Other intangible assets
Other intangible assets include trademarks, distribution networks, licenses
and other rights. When participating in industrial projects in partnership
with other companies the Volvo Group in certain cases pays an entrance fee
to participate. These entrance fees are capitalized as intangible assets.
Amortization and impairment with finite useful life
Intangible assets other than goodwill are amortized on a straight line
basis over their estimated useful life. Amortization is based on the cost of
the assets, adjusted by impairments when applicable and estimated use-
ful lives. Amortization is recognized in the respective function to which it
belongs, meaning that amortization of product development is part of the
research and development expenses in the income statement. Impair-
ment tests for amortizable assets are performed if there are indications of
impairment. In addition, for capitalized development cost for products
and software not yet in use, impairment tests are performed annually. If
the recoverable amount of the asset is less than the carrying amount, an
impairment is recognized and the carrying amount of the asset is reduced
to the recoverable amount. The recoverable amount is the higher of the
fair value less costs of disposal and the value in use. The value in use is
measured as the discounted future cash flows, which the asset is expected
to generate either by itself or from the lowest cash-generating unit to
which the asset belongs.
Amortization periods
Trademarks Max 5 years
Distribution networks 10 years
Product and software development 3 to 8 years
SOURCE OF ESTIMATION UNCERTAINT Y
AND CRITICAL JUDGMENTS
Impairment of goodwill and other intangible assets
Impairment testing of goodwill and capitalized development cost not yet
in use are performed annually and in case of indication of impairment.
Other intangible assets, with finite useful lives, are tested in case of indi-
cation of impairment. When conducting impairment tests, estimates have
to be made to determine the recoverable amounts of cash-generating
units. The recoverable amount is based upon management’s projections
of future cash flows, which are generally based on internal business plans
and forecasts. While management believes that estimates of future cash
flows and other assumptions made are reasonable, there are uncertainties
which could materially affect the valuations. As described in the account-
ing policy for goodwill, surplus values differ between the operating seg-
ments and they are, to a varying degree, sensitive to changes in assump-
tions and the business environment.
 GROUP PERFORMANCE 2019 NOTES

Intangible assets, acquisition costs Capitalized product and Other intangible Total intangible
Goodwill software development assets assets

Opening balance 2018 22,853 45,266 8,109 76,228

Investments 1
0 3,732 13 3,745
Sales/scrapping 0 –327 –43 –370
Acquired and divested operations2 114 0 0 114
Translation differences 1,240 475 424 2,139
Reclassification at divestment 2 – – – –
Reclassifications and other –72 –24 8 –88
Acquisition cost as of Dec 31, 2018 24,135 49,122 8,511 81,768

Investments1 – 3,772 174 3,946

Sales/scrapping – –28 –17 –45
Acquired and divested operations2 –38 – 0 –38
Translation differences 628 314 212 1,153
Reclassification at divestment 2 –1,720 –4,754 -2,876 –9,349
Reclassifications and other –24 5 –48 –67
Acquisition cost as of Dec 31, 2019 22,981 48,431 5,956 77,369

12:1

Intangible assets, accumulated amortization Capitalized product and Other intangible Total intangible
and impairment Goodwill software development assets assets

Opening balance 2018 71 34,150 6,113 40,334

Amortization – 2,739 285 3,024

Impairment – 0 0 0
Sales/scrapping – –323 –43 –366
Acquired and divested operations2 – – – –
Translation differences – 475 264 739
Reclassification at divestment 2 – – – –
Reclassifications and other –71 –2 6 –67
Accumulated amortization and impairment as of Dec 31, 2018 – 37,039 6,625 43,664

Amortization – 2,680 283 2,963

Impairment – 0 0 0
Sales/scrapping – –31 –17 –47
Acquired and divested operations2 – – 0 0
Translation differences – 293 133 425
Reclassification at divestment 2 – –4,447 –1,806 –6,254
Reclassifications and other – 0 –50 –50
Accumulated amortization and impairment as of Dec 31, 2019 – 35,533 5,168 40,700
B/S   Net value in balance sheet as of December 31, 20183 24,135 12,083 1,886 38,104
B/S   Net value in balance sheet as of December 31, 20193 22,981 12,899 788 36,668

12:2
1 Including capitalized borrowing costs of SEK 0 M (0).
2  Read more in Note 3 Acquisitions and divestments of shares in subsidiaries, for a description of acquired and divested operations as well as assets
and liabilities held for sale.
3 Acquisition costs less accumulated amortization and impairments.

Goodwill per operating Dec 31, Dec 31,

segment 2019 2018

Trucks 11,983 13,301

Construction Equipment 9,198 8,988
Buses 1,083 1,044
Other operating segments 717 802
Total goodwill value 22,981 24,135

12:3

137
 GROUP PERFORMANCE 2019
13 TANGIBLE ASSETS
ACCOUNTING POLICY
The Volvo Group applies the cost method for measurement of tangible
assets, consisting of property, plant, equipment and investment property
as well as assets under operating leases.
Buildings includes owner-occupied properties and investment proper-
ties. Investment properties are properties owned for the purpose of
obtaining rental income and appreciation in value. Investment properties
are recognized at cost. For disclosure purposes, information regarding the
estimated fair value of investment properties is based on an internal dis-
counted cash flow projection as relevant observable market inputs for the
assets are not available. The required return is based on current property
market conditions for comparable properties in comparable locations.
Hence, the applied valuation method to measure fair value is classified as
level 3 of the fair value hierarchy and there have not been any changes in
valuation method during the year. Land contains land and land improve-
ments. Machinery and equipment consists of production related assets
such as machinery, type-bound tools and other equipment. Construction
in progress are assets under construction and advanced payments. Right-
of-use assets relates to lease contracts with the Volvo Group as a lessee.
Assets under operating leases are mainly owned by the Volvo Group.
These transactions are accounted for as operating lease transactions and
consists of contractual operating lease agreements with customers
within Financial Services and rental fleet which are assets used in a fleet
for rental business within Industrial Operations. Some rental fleet assets
are leased by the Volvo Group and later sub-leased to customers as oper-
ating leases. Sales with residual value commitments within Industrial
Operations are also recognized within assets under operating leases.
Read more in Note 7 Revenue about sales with residual value
­commitments.
Read more in Note 14 Leasing about right-of-use assets and assets under
operating leases.
Depreciation and impairment
Property, plant, equipment and investment property are depreciated over
their estimated useful lives. Land is not depreciated. Depreciation is rec-
ognized on a straight-line basis based on the cost of the assets, adjusted
by residual value when applicable, and estimated useful lives. Right-of-
use assets are generally depreciated over the lease term on a straight-line
basis. Assets under operating leases are depreciated on a straight-line basis
over the contract period. During the contract period, the depreciable amount
is adjusted through the income statement to correspond to estimated future
net realizable value to continuously reflect potential residual value risks at
the end of the contract period. Depreciation is recognized in the respective
function to which it belongs. Impairment tests are performed if there are
indications of impairment by calculating a recoverable amount which is the
higher of the asset’s fair value less cost of disposal and its value in use.
138
NOTES
Depreciation periods
Type-bound tools 3 to 8 years
Operating leases, rental fleet 3 to 5 years
Sales with residual value commitments 3 to 5 years
Machinery and equipment 5 to 20 years
Buildings and investment properties 20 to 50 years
Land improvements 20 years
13:1
SOURCE OF ESTIMATION UNCERTAINT Y
AND CRITICAL JUDGMENTS
Impairment of tangible assets
Impairment tests are performed if there is any indication that a tangible
asset has been impaired. The impairment tests are based on estimation of
the recoverable amount of the asset, or the cash-generating unit to which
the asset belongs. To determine the recoverable amount, projections of
future cash flows are used, which are based upon internal business plans
and forecasts. While management believes that estimates of future cash
flows and other assumptions made are reasonable, there are uncertainties
which could materially affect the valuations.
Residual value risks
Volvo Group is exposed to residual value risks related to assets under
operating leases which is the risks that the Volvo Group in the future
would have to dispose used vehicles at a loss if the price development of
these products is worse than what was expected when the contracts
were entered. The assessment of residual value risks is based upon an
estimation of the used vehicle’s future net realizable value (fair market
value). The estimated future net realizable value of the vehicles at the end
of the contract period is monitored individually on a continuing basis.
Thus, a decline in prices for used vehicles may negatively affect the Volvo
Group’s operating income. High inventories in the truck industry and the
construction equipment industry and low demand may have a negative
impact on the prices of new and used vehicles. In monitoring estimated
net realizable value of each vehicle included as assets under operating
leases, management considers current price-level of the used product
model. The price level are impacted by value of optional equipment, mile-
age, current condition, future price deterioration due to expected change
of market conditions, alternative distribution channels, inventory lead-
time, repair and reconditioning costs, handling costs, indirect costs asso-
ciated with the sale of used vehicles and legislative demands.
 GROUP PERFORMANCE 2019 NOTES

Reclassifications Investment properties

Reclassifications and other presented in the tables 13:2 and 13:3 mainly
consist of construction in progress, rental fleet and assets related to sales
with residual value commitments (buyback or tradebacks).
For construction in progress, reclassification occurs when the asset is
available for use by transferring the assets to the respective category
within property, plant and equipment.
For rental fleet and sales with residual value commitments, reclassifi-
cations occurs when the vehicle is sold or rented out to customers by
transferring the vehicle from inventory to assets under operating leases. If
the vehicle is returned by the end of the residual value commitment period
or the leasing period, the vehicle is reclassified back to inventory.
The acquisition value of investment properties at year-end amounted to
SEK 91 M (70). Reclassifications amounted to SEK 0 M (0). Accumulated
depreciation amounted to SEK 28 M (43) at year-end, of which SEK 4 M
(2) refers to 2019. The net carrying value amounted to SEK 63 M (27).
The estimated fair value of investment properties amounted to SEK 94 M
(63) at year-end and 98% (98) of the area available for lease was leased
out during the year. Operating income was affected by rental income from
investment properties that amounted to SEK 11 M (7) and direct costs
that amounted to SEK 7 M (1).

Tangible assets, Property, plant, equipment Assets under operating

Acquisition cost  and investment property leases1
Sales w.
­residual
Machinery Construc- Right- value Total
and equip- tion in of-use Operating Rental commit- ­tangible
Buildings Land ment progress assets1 leases fleet ments2 assets

Opening balance 2018 36,957 11,772 80,672 4,081 – 30,087 5,271 24,850 193,690

Investments 434 239 1,927 4,443 – 10,133 – 1 17,177

Sales/scrapping –282 –246 –1,507 –7 – –9,545 0 0 –11,587
Acquired and divested operations 3 –26 –10 4 – – – – – –32
Translation differences 1,653 807 2,575 76 – 1,406 165 1,076 7,758
Reclassified at divestment 3 –58 –120 0 – – – – – –178
Reclassifications and other 745 72 1,920 –2,792 – –249 660 –694 –338
Acquisition costs as of Dec 31, 2018 39,423 12,514 85,591 5,801 – 31,832 6,096 25,233 206,490

Transition effect IFRS 16 4 –715 –78 –501 – 7,503 – – – 6,209

Investments 502 335 2,198 5,094 1,914 9,944 0 0 19,987
Sales/scrapping –284 –284 –3,474 –5 –200 –11,268 0 0 –15,514
Acquired and divested operations 3  – – –8 – –34 – – – –43
Translation differences 1,264 643 1,644 29 189 1,069 210 304 5,352
Reclassified at divestment 3 –9,074 –6,297 –9,073 –79 –830 – – –188 –25,540
Reclassifications and other 1,729 128 2,084 –3,954 164 826 –963 –49 –34
Acquisition costs as of Dec 31, 2019 32,847 6,962 78,460 6,887 8,706 32,402 5,343 25,301 196,908

13:2
1  Read more in Note 14 Leasing about right-of-use assets and assets under operating leases.
2  Read more in Note 7 Revenue about sales with residual value commitments.
3  Read more in Note 3 Acquisitions and divestments of shares in subsidiaries, for a description of acquired and divested operations as well as assets
and liabilities held for sale.
4  Read more in Note 31 Changes in Volvo Group Financial Reporting 2019. The opening balance for 2019 is restated due to the implementation of IFRS 16.

139
 GROUP PERFORMANCE 2019 NOTES

Tangible assets, Property, plant, equipment Assets under operating

Accumulated depreciation and investment property leases1
and impairments Sales w.
residual
Machinery Construc- Right- Operat- value Total
and equip- tion in of-use ing Rental commit- ­tangible
Buildings Land ment progress assets1 leases fleet ments2 assets

Opening balance 2018 18,759 1,265 60,097 15 – 8,765 1,471 8,381 98,753

Transition effect IFRS 9 5

– – – – – –77 – – –77

Depreciation 1,378 98 4,865 – – 4,704 839 2,977 14,861

Impairment – 24 –4 – – – 0 535 555
Sales/scrapping –212 –52 –1,392 – – –4,158 0 – –5,814
Acquired and divested operations 3  –12 0 –7 – – 0 – – –19
Translation differences 941 57 1,997 – – 444 44 401 3,884
Reclassified at divestment 3 –36 0 0 – – – – – –36
Reclassifications and other –13 –2 –110 – – –35 –624 –3,610 –4,394
Accumulated depreciation and
i­mpairments as of Dec 31, 2018 20,805 1,390 65,446 15 – 9,643 1,730 8,685 107,714

Transition effect IFRS 16 4

–219 –10 –279 – 508 – – – 0
Depreciation 1,436 101 4,736 – 2,125 4,708 1,016 2,554 16,676
Impairment 5 –2 0 – 0 0 27 916 946
Sales/scrapping –201 –23 –3,299 – –92 –5,105 – – –8,720
Acquired and divested operations 3  0 – –8 – –3 0 – – –11
Translation differences 663 32 1,225 – –3 323 64 111 2,415
Reclassified at divestment 3 –5,443 –199 –7,641 – –379 – – –47 –13,710
Reclassifications and other 21 10 –164 – –188 231 –1,308 –3,829 –5,226
Accumulated depreciation and
­impairments as of Dec 31, 2019 17,068 1,299 60,016 15 1,968 9,800 1,529 8,391 100,084
B/S  Net value in balance sheet
as of Dec 31, 20186 18,618 11,124 20,145 5,786 – 22,189 4,366 16,548 98,776
B/S  Net value in balance sheet
as of Dec 31, 20196 15,779 5,663 18,444 6,872 6,738 22,602 3,814 16,910 96,822

13:3

1  Read more in Note 14 Leasing about right-of-use assets and assets under operating leases.
2  Read more in Note 7 Revenue about sales with residual value commitments.
3  Read more in Note 3 Acquisitions and divestments of shares in subsidiaries, for a description of acquired and divested operations as well as assets
and liabilities held for sale.
4  Read more in Note 31 Changes in Volvo Group Financial Reporting 2019. The opening balance for 2019 is restated due to the implementation of IFRS 16.
5 The opening balance for 2018 is restated due to the implementation of IFRS 9.
6 Acquisition costs less accumulated depreciation and impairments.

140
 GROUP PERFORMANCE 2019
14 LEASING
ACCOUNTING POLICY
Volvo Group as the lessor
Leasing contracts are defined in two categories, operating and finance
leases, depending on the contracts’ financial implications.
Operating leases are offered from Financial Services (contractual oper-
ating leases) and from Industrial Operations (rental fleet agreements).
Sales with residual value commitments (buybacks and tradebacks) are
also accounted for as operating lease transactions when the customer has
a significant economic incentive to exercise the option to return the vehicle
and the control has therefore not been transferred to the customer. Oper-
ating lease agreements are recognized as tangible assets in assets under
operating leases and are valued at cost less accumulated depreciation and
impairment, if needed. The cost of an asset comprises the acquisition value
and any initial direct costs related to the contract. Depreciation of the asset
is recognized on a straight-line basis over the contract period. During the
period the depreciable amount is adjusted through the income statement
by depreciations or write-downs to correspond to the estimated realizable
value at the end of the contract period. Lease income is equally distributed
over the contract period and recognized within net sales.
Read more in Note 7 Revenue, about sales with residual value commitments.
 ead more in Note 13 Tangible assets, about residual value risks related to
R
assets under operating lease.
Finance lease contracts are offered from Financial Services. As Industrial
Operations manufacture the vehicles which are leased from Financial
Services to the customers, the Volvo Group is acting as a manufacturer
lessor. Hence, a finance lease asset gives rise to a selling profit which is
recognized within Industrial Operations. Finance lease contracts are rec-
ognized as non-current and current customer-financing receivables
within Financial Services. The asset is measured at an amount equal to
the net investment in the finance lease contract corresponding to the
gross investment (future minimum lease payments and unguaranteed
residual value) discounted with the rate in the finance lease contract and
reduced by unearned finance income and allowance for expected credit
losses. Assessment of allowance for expected credit losses is reflected in
the valuation of customer-financing receivables and recognized at initial
recognition and reassessed during the contract period. Lease income is
recognized as interest income within net sales in Financial Services. Vari-
able lease payments not dependent on an index or rate are recognized as
income as they occur. Payments received from finance lease contracts are
distributed between interest income and amortization of the receivable.
 ead more in Note 15 Customer-financing receivables, about finance lease
R optional periods are evaluated. The importance of the underlying asset in
contracts.
Volvo Group as the lessee
Lease contracts are recognized as right-of-use (RoU) assets as well as
interest-bearing lease liabilities in the balance sheet. Lease liabilities are
recognized within other loans and are measured by the present value of
future lease payments. The lease payments are discounted by using a rate
reflecting what the Volvo Group would have to pay to borrow funds to
acquire a similar asset, with similar collateral and similar term. RoU assets
are presented as tangible assets and are valued at cost less accumulated
NOTES
depreciation and impairment, if needed. The cost of a RoU asset contains
the initial amount of the lease liability adjusted for any lease payments
made before the commencement date, less any lease incentives received.
Moreover, any initial direct costs are included as well as an estimate of
costs to be incurred in dismantling, removing or restoring the underlying
asset. The leased asset is depreciated on a straight-line basis over the
lease term, or over the useful life of the underlying asset if the ownership is
transferred to the Volvo Group at the end of the lease term. The lease
expense is recognized as depreciation of the asset within operating income
and interest expense within the finance net. Payments made are distrib-
uted between interest paid and amortization of the lease liability.
Lease contracts with the Volvo Group as the lessee are primarily con-
tracts of real estate (such as office buildings, warehouses and dealer
premises), company cars and production related assets. For real estate
and company car leases, service components are normally a considerable
portion of the contracts and are therefore separated. Thus, the service
components are recognized as operating expenses and not included in the
RoU asset and the lease liability. For other lease contracts, both the leased
asset and services are included in the RoU asset and the lease liability.
If a lease contract includes variable lease payments not dependent on an
index or rate, or include a low value asset or has a lease term that is twelve
months or less, the lease payments are recognized as operating expenses
as they occur.
SOURCE OF ESTIMATION UNCERTAINT Y
AND CRITICAL JUDGMENTS
Measurement of lease liabilities and right-of-use assets
When entering a lease contract, judgments related to contract scope,
lease term and interest rate used when discounting future lease payments
are made which affects the measurement of the lease liability and RoU
asset.
Assessment of contract scope includes judgments whether a leased
asset and/or a service component is identified in the contract. In com-
bined contracts, the total contract amount is allocated between the
leased asset and the service by using a market stand-alone price.
When determining the lease term of a contract, judgments are also
required. The lease term includes the non-cancellable period. If the Volvo
Group is reasonably certain to use an option to extend the lease, or not to
use an option to terminate the lease in advance, this is also considered.
The contracts contain a range of different conditions. Extension and ter-
mination options are mainly related to real estate leases. Thus, all relevant
facts and circumstances that create an economic incentive to include
the operations and its location, availability of suitable alternatives, signifi-
cant leasehold improvements, level of rentals in optional periods com-
pared to market rates as well as past practice are examples of factors
included in the assessment. Lease terms are negotiated on an individual
basis and are reassessed if an option is exercised.
Judgments are also required to determine the interest rate when dis-
counting future lease payments and whether the interest rate implicit in
the lease can be readily determined and thereby used, or if the Volvo
Group’s incremental borrowing rate should be used.
141
 GROUP PERFORMANCE 2019 NOTES

Volvo Group as the lessor A reconciliation of the future rental payments for operating leases as of
December 31, 2018 and interest-bearing lease liabilities as of January 1,
2019 is presented in table 14:3. The Volvo Group used a weighted aver-
Lease income Dec 31, age incremental borrowing rate of 4.21% when calculating the lease lia-
2019 bilities recognized in the balance sheet at the date of transition.

Finance leases
Finance income on customer-financing receivables 2,738
Total 2,738 Reconciliation of lease liabilities at transition
to IFRS 16
Operating leases
Lease income on assets under Future rental payments for operating leases as of
operating lease 12,305 December 31, 2018 7,993
Total 12,305 Contracts not included in lease liabilities, such as
short-term leases, leases of low value assets and
14:1 service contracts –977
Operating lease obligations as of December 31,
During 2019, the selling profit for vehicles subject to finance lease con- 2018 (gross) 7,016
tracts amounted to SEK 3,959 M and was recognized within Industrial Discounting effects –807
Operations. Operating lease obligations as of December 31,
As of December 31, 2019, future lease income from non-cancellable 2018 (net, discounted) 6,209
finance and operating leases (minimum lease fees excluding sales with
residual value commitments) amounted to SEK 75,198 M (75,833). Finance lease liabilities as of December 31, 2018 960
Lease liabilities as of January 1, 2019 7,169
Read more in Note 15 Customer-financing r­ eceivables about finance leases.
14:3

Maturity analysis of lease Finance Operating

payments receivable leases leases Finance lease liabilities Dec 31,
2018
2020 21,310 9,041
Non-current finance lease liabilities 761
2021 14,394 6,685
Current finance lease liabilities 199
2022 9,361 4,121
Total finance lease liabilities 960
2023 4,773 1,815
2024 1,995 774
2025 or later 627 303 Lease liabilities Dec 31,
Total undiscounted lease payments 52,459 22,739 2019

Unguaranteed residual value 473 Non-current lease liabilities 5,334

Unearned finance income –3,230 Current lease liabilities 1,755
Allowance for expected credit losses –1,027 Total lease liabilities 7,089
Customer-financing receivables
(current and non-current) 48,675 14:4

14:2
Non-current lease liabilities maturities, SEK M
Volvo Group as the lessee
As from January 1, 2019, IFRS 16 Leases was applied retrospectively but
prior period reported financial information was not restated. Hence, the
opening balance for 2019 was adjusted in accordance with the new
standard. Thus, the part of the tables attributable to 2018 is in accord-
ance with the former lease accounting standard IAS 17, valid until Decem-
ber 31, 2018, and the part of the tables attributable to 2019 is in accord-
ance with IFRS 16, valid as from January 1, 2019. As an effect of the 2021 2022 2023 2024 2025 2026 or later
1,499 1,174 793 471 360 1,037
implementation of the new accounting standard for leases, RoU assets
and interest-bearing lease liabilities increased as lease contracts are rec- 14:5
ognized in the balance sheet.
During 2019, total cash outflows related to leases amounted to SEK
Read more in Note 31 Changes in Volvo Group Financial Reporting 2019.
The opening balance for 2019 is restated due to the implementation of 3,283 M, with a distribution of SEK 1,249 M within operating cash flow
IFRS 16. and SEK 2,034 M within financing activities.

142
 GROUP PERFORMANCE 2019 NOTES

Carrying amount of assets subject to finance leases Asset under

as of Dec 31, 2018 Machinery operating lease
and and rental
Buildings Land equipment fleet1 Total

Acquisition cost 715 78 501 397 1,691

Accumulated depreciation –219 –10 –279 –136 –644
Carrying amount in balance sheet as of Dec 31, 2018 495 68 222 261 1,047

Carrying amount of right-of-use assets Asset under

as of Dec 31, 2019 Machinery operating lease
and Company and rental
Buildings Land equipment cars fleet1 Total

Acquisition cost
Opening balance 2019 5,535 419 920 629 397 7,900
Additions to right-of-use assets2 1,013 93 –281 378 21 1,224
Acquisition cost as of Dec 31, 2019 6,548 512 639 1,007 418 9,124

Accumulated depreciation
Opening balance 2019 –219 –10 –271 –8 –136 –644
Depreciation –1,112 –58 64 –354 5 –1,455
Accumulated depreciation as of Dec 31, 2019 –1,331 –68 –207 –362 –131 –2,099

Carrying amount in balance sheet as of Dec 31, 2019 5,217 444 432 645 287 7,025

14:6

1 Refer to the assets leased by the Volvo Group which are later sub-leased to customers as operating lease.
2 Additions to RoU assets for the year ended December 31, 2019 mainly relate to new lease contracts signed.

Recognized in the income statement 2019 Rental expenses 2018

Interest expense on lease liabilities within Finance leases:

Financial Services –1   Contingent rents –8
Depreciation of right-of-use assets –2,187 Operating leases:
Short term lease expense –785   Contingent rents –32
Low value asset expense –116   Rental payments –2,102
Variable lease expense –33   Sub-lease payments 42
Income from sub-leasing right-of-use assets 145 Total –2,100
Gain or losses on right-of-use assets 24
Recognized in operating income –2,952

Interest expense on lease liabilities within

Industrial Operations –338
Recognized in net financial items –338

14:7

143
 GROUP PERFORMANCE 2019 NOTES

15 CUSTOMER-FINANCING RECEIVABLES

ACCOUNTING POLICY
Non-current customer-financing Dec 31, Dec 31,
Installment credits, dealer financing and other receivables within customer- receivables 2019 2018
financing receivables are held as part of a business model whose objective
Installment credits 41,212 34,763
is of collecting contractual cash flows. The contractual cash flows are
Finance leases 29,682 30,167
solely payments of principal and interest and are valued at amortized cost
Other receivables 989 1,218
in accordance with the effective interest method. Finance lease contracts
are valued at amortized cost, for further information on recognition and
B/S  Non-current customer-
financing receivables1 71,883 66,148
classification see note 14 Leasing.
The Volvo Group is applying the simplified expected credit loss model
for customer-financing receivables, under which the loss allowance is 15:1

measured at an amount equal to lifetime expected credit losses. The 1 A reclassification has been made during 2019 to assets held for sale of
SEK 2,740 M, Read more in Note 3 Acquisitions and divestments
allowance is recorded at initial recognition and is reassessed during the
of shares in sub­sidiaries.
contract period.
Interest income on customer-financing receivables is recognized within The effective interest rate for non-current customer-financing receivables
net sales, mainly within Financial Services. Changes to the allowance for amounted to 4.98% (4.81) as of December 31, 2019.
expected credit losses are recognized in other operating income and
expense.

Non-current customer-­financing receivables maturities, SEK M

SOURCE OF ESTIMATION UNCERTAINT Y

AND CRITICAL JUDGMENTS

Allowance for expected credit losses

The assessment of allowances for expected credit losses on customer-­
financing receivables is dependent on estimates including assumptions
regarding past dues, repossession rates and the recovery rate on the
2021 2022 2023 2024 2025 or later
underlying collateral. No significant changes in estimation techniques or 31,399 21,542 12,255 5,358 1,329
important assumptions have been made during the year.
A collective assessment is made for customer-financing receivables 15:2
that are not credit impaired. The assets are grouped based on shared risk
characteristics such as type of customer, geographical area, initial credit
risk rating, collateral type and date of initial recognition to evaluate the
Current customer-financing Dec 31, Dec 31,
credit losses collectively. Historical information regarding credit loss receivables 2019 2018
experience is used to forecast future losses, adjusted for ­current and fore-
casted conditions in the different regions based on management’s evalu- Installment credits 21,732 19,703
ation of macro-level and portfolio-level factors, such as GDP, oil prices, Finance leases 18,993 17,630
unemployment rates etc. Dealer financing 28 ,654 21,721
An individual assessment is made for credit impaired customer-financing Other receivables 1 ,719 1,725
receivables based on the financial condition of the customers and the B/S  Current customer-financing
value of the underlying collateral and guarantees. The Volvo Group consid- receivables1 71,099 60,779
ers a financial asset credit impaired if it meets one or more of the following
criteria; when there are indications that the customer is unlikely to pay, 15:3
such as bankruptcy filing, unauthorized transfer of collateral, at surrender of 1 A reclassification has been made during 2019 to Assets held for sale of
collateral etc. or, at the latest, when the customer fails to make contractual SEK 1,405 M, Read more in Note 3 Acquisitions and divestments ­
payment within 90 days of when the receivable falls due. of shares in sub­sidiaries.

The effective interest rate for current customer-financing receivables

amounted to 4.85% (4.82) as of December 31, 2019.
Risk management practices
Other than the dealer financing, customer-financing receivables extend
over several years, but normally require the customers to make monthly
payments throughout the term to reduce the outstanding exposure. The Credit risk in customer-financing Dec 31, Dec 31,
customer-financing receivables are secured by the financed commercial receivables 2019 2018
vehicles and equipment. However, in the case of customer default, the
value of the repossessed commercial vehicles and equipment may not Customer-financing receivables gross 145,326 129,115
necessarily cover the outstanding financed amount. In order to mitigate Allowance for expected credit losses for
­customer-financing receivables –2,343 –2,187
this risk, Financial Services has strong portfolio management processes
based on prudent credit approval, active monitoring of individual loan per- Whereof allowance for credit impaired   –361 –329
formance, utilization of in-house and external collections, portfolio seg- Whereof allowance for not credit impaired  –1,982 –1,859
mentation analysis, and on-going monitoring of the economic, ­political Customer-financing receivables,
net of allowance 142,982 126,927

15:4

144
 GROUP PERFORMANCE 2019 NOTES

and industry conditions in each market. In addition, other credit enhance-

ments such as down payments, personal guarantees, credit insurance,
liens on other property owned by the borrower etc. may be required at the Change of a ­ llowance 2019 2018
time of origination or when there are signs of impairment. When customer-­ for expected credit
Not Not
losses for customer-­ credit Credit credit Credit
financ­ing receivables exceed 90 days of overdue collateral repossession
financing ­receivables impaired impaired impaired impaired
is initiated, although there may be circumstances where repossession is
initiated earlier. When the collateral is repossessed, the net realizable Closing balance
value is established and transferred to inventory and becomes part of the previous year 1,859 329 1,277 299
Volvo Group’s normal business activity of selling used vehicles and equip- Transition effect IFRS 91 – – 397 –
ment and the expected loss on the customer-financing receivable is writ- Opening balance 1,859 329 1,674 299
ten off. If repossession has not occurred on customer-financing receiva- New valuation allowance
bles exceeding 180 days of overdue the expected loss on the receivable is charged to income 642 217 522 150
written off. Financial Services continues to engage in enforcement activ- Reversal of valuation
ity on all customer financing-­receivables written off during the year to allowance charged to
income  –40 –90 –45 –62
attempt to recover the contractual amount not previously received from
Utilization of valuation
the customer. allowance related to
During 2019 certain financial assets have been renegotiated in situa- actual losses –0 –532 – –331
tions where the customer’s default was due to a temporary or correctable Movements between not
situation but this has not had any significant impact on either the credit credit impaired/credit
risk or the income statement. Renegotiated assets continue to be moni- impaired2 –430 430 –257 257
tored closely for on-going payment performance and signs of impairment. Translation differences 71 11 38 16
Reclassification3 –11 –3 – –

Read more in Note 4 Goals and policies in financial risk management, for
a description of credit risks, interest risks and currency risks. Syndication transactions
and other –109 –1 –73 –1
Allowance for
As of December 31, 2019, the total allowances for expected credit losses in
expected credit losses
Financial Services amounted to 1.51% (1.63) of the total credit portfolio in for customer-­financing
the segment. This reserve ratio is used as an important measure for Finan- receivables as of
cial Services and includes operating leases and inventory. Allowances for December 31 1,982 361 1,859 329
expected credit losses for customer-financing receivables has increased
15:5
since the beginning of the year from SEK 2,187 M to SEK 2,343 M pri-
marily due to the overall increase in the customer-financing portfolio. Dur- 1 The opening balance for 2018 is restated due to the implementation of
ing the year, economic conditions in certain segments have continued to IFRS 9.
show improvement, having a slightly offsetting effect on the overall allow- 2 When a receivable becomes credit impaired a transfer of allowance is made
to allowance for credit impaired receivables.
ance level.
3A  reclassification has been made during 2019 to Assets held for sale of
Read more in Note 30 Financial instruments, for information on the gain SEK 14 M, Read more in Note 3 Acquisitions and divestments of shares
or loss recognized in the operating income arising from derecognition of in sub­sidiaries.
­customer-financing receivables in table 30:3.

Table 15:6 represents the gross credit exposure on customer-financing
receivables within the Volvo Group per age interval. The lifetime expected
credit loss allowance for customer-financing receivables not credit
im­paired amounted to SEK 1,982 M (1,859) and allowance for customer-­
financing receivables credit impaired amounted to SEK 361 M (329),
included in tables 15:4 and 15:5. The remaining exposure was secured
by liens on the financed commercial vehicles and equipment and, in cer-
tain circumstances, other credit enhancements such as personal guaran-
tees, credit insurance, liens on other property owned by the borrower etc.
Collaterals taken in possession that meet the criteria for recognition in the
balance sheet amounted to SEK 278 M (147) as of December 31, 2019.

Customer-financing receivables Dec 31, 2019 Dec 31, 2018

Gross exposure Not due 1–30 31–90 >90 Total Not due 1–30 31–90 >90 Total

Customer-financing receivables total 130,818 10,223 3,017 1,268 145,326 118,172 7,390 2,241 1,312 129,115
Whereof not credit impaired 130,606 9,172 2,366 218 142,362 117,955 6,632 1,713 531 126,831
Whereof credit impaired 213 1,051 651 1,049 2,963 217 758 528 781 2,284

15:6

145
 GROUP PERFORMANCE 2019 NOTES

Concentration of credit risk

Customer concentration
Geographic market, percentage of customer-financing portfolio (%)
The ten largest customers within Financial Services account for 6.8%
(6.1) of the total asset portfolio. The rest of the portfolio is attributable to
a large number of customers and the credit risk is therefore spread across
many customers. Europe, 37.7%

North America, 42.0%

Concentration by geographical market
Asia, 8.7%
Graph 15:7 discloses the concentration of Financial Services portfolio
divided into geographical markets. South America, 8.3%

Africa and Oceania, 3.3%


Read more in Note 4 Goals and policies in financial risk management
about credit risks.

Read more in the Board of Directors’ report about Financial Services’
15:7
development during the year.

16 RECEIVABLES

ACCOUNTING POLICY
Receivables are recognized at amortized cost. Changes to the allowance
for expected credit losses for accounts receivables are recognized in other
operating income and expense.
The Volvo Group is applying the simplified expected credit loss model
for accounts receivables, under which the loss allowance is measured at
an amount equal to lifetime expected credit losses. The allowance is
recorded at ­initial recognition and is reassessed during the contract
period.
Read more in Note 30 Financial Instruments in section derecognition of
financial assets, for receivables subject to discounting activities.
ruptcy, or when an allowance has been unchanged for two years and it can
be demonstrated that all required steps have been performed the allow-
ance is reversed and the accounts receivables are written off. Apart from
certain exceptions the Volvo Group continues to engage in enforcement
activity even after a write-off in order to recover the contractual amount
not previously received.
During 2019 certain receivables have been renegotiated but this has
not had a significant impact on either the credit risk or the income state-
ment. Renegotiated receivables continue to be closely monitored for
on-going payment performance and signs of impairment.
As of December 31, 2019, the total allowance for expected credit
losses for accounts receivables amounted to 2.64% (2.83) of total
accounts receivables.

 ead more in Note 4 Goals and policies in financial risk management,

R
regarding credit risk.

SOURCE OF ESTIMATION UNCERTAINT Y

AND CRITICAL JUDGMENTS
Non-current receivables Dec 31, Dec 31,
2019 2018
Allowance for expected credit losses
Accounts receivables are short term by nature and consequently the risk Other interest-bearing receivables 1 229 357
assessment horizon is short. A collective assessment is made on accounts Interest and currency risk derivatives 2 1,106 1,624
receivables not credit impaired. Historical information regarding credit Contract and right of return assets3 3,279 4,394
loss experience is used to forecast future losses, adjusted for ­current and Other receivables 4,645 3,656
forecasted conditions. An individual assessment is made on credit Non-current receivables  9,259 10,031
impaired accounts receivables based on the financial condition of the cus-
tomer. 16:1
1 The amount is the non-current part of other interest-bearing receivables
in note 30 Financial Instruments, table 30:1.
Risk management practices 2 T he amount is the non-current part of Interest and currency risk derivatives
Credit risks are managed through active credit monitoring and follow-up in note 30, table 30:1.
routines in accordance with the Volvo Group Credit management directive. 3  Read more in Note 7 Revenue, about contract and right of return
assets.
This directive includes different steps to perform when an invoice is not
paid at due date. When a credit risk is verified, for example through a bank-

146
 GROUP PERFORMANCE 2019 NOTES

Current receivables  Dec 31, Dec 31, Change of allowance

2019 2018 for expected credit losses on accounts
receivables 2019 2018
Other interest-bearing receivables 1 1,275 183
Accounts receivables 2
37,723 41,906 Closing balance previous year 1,221 1,156
Prepaid expenses and accrued income 3,030 3,144
Transition effect IFRS 9 1
– 26
VAT receivables 3,223 3,311
Interest and currency risk Opening balance  1,221 1,182
derivatives3 909 2,183 New allowance charged to income 380 309
Contract and right of return assets4 4,589 1,056 Reversal of allowance charged to income –173 –144
Other receivables 7,465 7,363 Utilization of allowance related to actual losses –121 –153
Current receivables, after deduction of Translation differences 34 27
allowance for expected credit losses on
accounts receivable s 58,214 59,146 Reclassifications, etc2 –320 0
Allowance for expected credit losses on
16:2 accounts ­receivables as of December 31 1,021 1,221
1 The amount is the current part of other interest-bearing receivables in
note 30 Financial Instruments, table 30:1. 16:3
2 A reclassification has been made during 2019 to assets held for sale of 1 The opening balance for 2018 is restated due to the implementation of IFRS 9.
SEK 4,742 M, Read more in Note 3 Acquisitions and divestments ­ 2 I ncludes reclassification to other non-current receivables (SEK –277 M) and
of shares in sub­sidiaries. reclassification to assets held for sale (SEK –37 M), Read more in Note 3
3 T he amount is the current part of Interest and currency risk derivatives in Acquisitions and divestments of shares in subsidiaries
note 30 Financial instruments, table 30:1.
4  Read more in Note 7 Revenue, about contract and right of return Read more in Note 30 Financial Instruments.
assets.

Age analysis of accounts receivables Dec 31, 2019  Dec 31, 2018

Not Due 1–30 31–90 >90 Total Not Due 1–30 31–90 >90 Total

Accounts receivables gross 35,406 1,281 625 1,433 38,744 39,057 1,843 723 1,503 43,127
Allowance for expected credit losses
on accounts receivables –285 –19 –52 –664 –1,021 –480 –11 –37 –693 –1,221
B/S   Accounts receivables net 35,121 1,262 572 768 37,723 38,577 1,832 686 810 41,906

16:4

147
 GROUP PERFORMANCE 2019 NOTES

17 INVENTORIES

ACCOUNTING POLICY
Inventory Dec 31, Dec 31,
2019 2018
Inventories are recognized at the lower of cost and net realizable value.
The cost is established by using the first-in, first-out principle (FIFO) and Finished products 34,368 40,440
is based on the standard cost method, including costs for all direct manufac- Production materials, etc. 22,277 25,343
turing expenses and the attributable share of capacity and other manu­ B/S  Inventory1 56,644 65,783
facturing-related costs. The standard costs are tested regularly and adjust-
ments are made based on current conditions. Costs for research and 17:1
development, selling, administration and financial expenses are not in­cluded. 1 A reclassification has been made to assets held for sale amounting to SEK
Net realizable value is calculated as the selling price less costs attribut- 5,510 M. Read more in Note 3 Acquisitions and divestments of shares
able to the sale. in subsidiaries, about assets held for sale.

The total inventory value, net of inventory obsolescence allowance, was

SEK 56,644 M (65,783) as of December 31, 2019. Inventories recog-
SOURCE OF ESTIMATION UNCERTAINT Y nized as cost of sold products during the period amounted to SEK 311,495M
AND CRITICAL JUDGMENTS (281,072).

Inventory obsolescence
The calculation of net realizable value involves estimation of a future sales
price, which is dependent on several parameters, such as market demand, Change in allowance
model changes and development of used products prices. If the net real- for inventory obsolescence 2019 2018
izable value is lower than cost, a valuation allowance is established for Opening balance 3,926 3,489
inventory obsolescence. Change in allowance for inventory
­obsolescence charged to income 722 432
Scrapping –414 –370
Translation differences 109 133
Reclassifications etc. –40 242
Allowance for inventory obsolescence
as of December 31 4,303 3,926

17:2

148
 GROUP PERFORMANCE 2019 NOTES

18 CASH AND CASH EQUIVALENTS

Cash and cash equivalents as of December 31, 2019, include SEK 2.4 bil-

ACCOUNTING POLICY
Cash and cash equivalents include highly liquid interest-bearing securities
that are considered easily convertible to cash. These include market­able
securities and reverse repurchase agreements, with a date of maturity
within three months at the time of investment. Interest-bearing securities
with a date of maturity exceeding three months at the time of investment
are recognized as marketable securities.
lion (1.9) that is not available for use by the Volvo Group and SEK 9.1 billion
(5.6) where other limitations exist, mainly cash and cash equivalents in
countries where exchange controls or other legal restrictions apply.
Therefore it is not p­ ossible to immediately use these cash and cash equiv-
alents in other parts of the Volvo Group, however there is normally no
limitation to use them for the Volvo Group’s operation in the respective
country.

Read more in Note 30 Financial instruments, about accounting policies

for financial instruments.

Cash and cash equivalents Dec 31, Dec 31,

2019 2018

Cash in banks 49,030 38,804

Marketable securities with original
duration less than 3 months1 2,925 1,271
Time deposits in banks 9,505 5,831
Reverse repurchase agreements2 – 1,027
B/S   Cash and cash equivalents 61,461 46,933

18:1
1 Additionally the Volvo Group recognized outstanding marketable securities
with original duration exceeding 3 months of SEK 200 M (160) in govern-
ment securities as of December 31, 2019.
2 A reverse repurchase agreement is a financial transaction where one party
commits to buy securities from a counterpart with the agreement to sell
back the securities at an agreed price at a set future date.

149
 GROUP PERFORMANCE 2019 NOTES

19 EQUITY AND NUMBER OF SHARES

ACCOUNTING POLICY
Change in other reserves  Holding of
shares at
Earnings per share before dilution is calculated as income for the period, fair value
attributable to the owners of AB Volvo, divided by AB Volvo’s average
number of outstanding shares for the fiscal year. Diluted earnings per Opening balance 2019 226
share is calculated as income for the period attributable to the owners of Other changes –
AB Volvo, divided by AB Volvo’s average number of outstanding shares for Fair value adjustments regarding
the fiscal year, including the average number of shares that would be holdings in Japanese companies 10
issued as an effect of ongoing share-based incentive programs. If during Fair value adjustments regarding
the year there were potential shares redeemed or expired, they are also other companies 0
included in the average number of shares used to calculate the earnings Balance as of December 31, 2019 236
per share after dilution.
19:1

The share capital of the parent company is divided into two series of
shares, A and B. Both series carry the same rights, except that each Series Information regarding Dec 31, Dec 31,
A share carries the right to one vote and each Series B share carries the number of shares 2019 2018
right to one tenth of a vote. The shares’ quota value is SEK 1.20.
Own Series A shares 20,728,135 20,728,135
Cash dividend 2019, decided by the Annual General Meeting 2018,
Own Series B shares 74,240,001 74,777,727
amounted to SEK 5.00 (4.25) per share and an extraordinary dividend
amounted to SEK 5.00 (–), generating a total amount of SEK 20,335 M Total own shares 94,968,136 95,505,862
(8,636). Own shares in % of total
During 2019 AB Volvo, free of charge, transferred 537,726 treasury ­registered shares 4.46 4.49
B-shares, with a total quota value of 645,271 SEK to participants in the
Outstanding Series A shares 456,184,336 457,377,694
long-term share-based incentive program for senior executives in the
Outstanding Series B shares 1,577,267,748 1,575,536,664
Volvo Group. This allotment is a final settlement of the debt of shares
related to the long-term share-based incentive program. The transferred Total outstanding shares 2,033,452,084 2,032,914,358
treasury shares represent an insignificant part of the total share capital in Total registered Series A shares 476,912,471 478,105,829
AB Volvo. During 2019 the long-term share-based incentive program was Total registered Series B shares 1,651,507,749 1,650,314,391
finalized.
Total registered shares 2,128,420,220 2,128,420,220
During 2019 AB Volvo converted a total of 1,193,358 Series A shares to
Series B shares. Average number of
Unrestricted equity in the parent company as of December 31, 2019 outstanding shares 2,033,405,780 2,032,210,615
amounted to SEK 31,319 M (37,032).
19:2
 ead more in Note 27 Personnel about the Volvo Group share-based
R
­incentive program.

Series A shares Series B shares Total

Share capital 2019 2018 2019 2018 2019 2018

Outstanding shares opening balance 457,377,694 459,247,373 1,575,536,664 1,572,606,911 2,032,914,358 2,031,854,284
Allotment to long-term incentive program – – 537,726 1,060,074 537,726 1,060,074
Converting Series A shares to Series B shares –1,193,358 –1,869,679 1,193,358 1,869,679 – –
Outstanding shares as of December 31 456,184,336 457,377,694 1,577,267,748 1,575,536,664 2,033,452,084 2,032,914,358

19:3

Information regarding shares 2019 2018

Number of outstanding shares, December 31, in millions 2,033 2,033

Average number of shares before dilution in millions 2,033 2,032
Shares that would be issued as an effect of ongoing shared-based incentive programs, in millions 0 1
Average number of shares after dilution in ­millions 2,033 2,033
Average share price, SEK 139.93 147.98
Net income attributable to owners of AB Volvo 35,861 24,897
Basic earnings per share, SEK 17.64 12.25
Diluted earnings per share, SEK 17.64 12.24

19:4

150
 GROUP PERFORMANCE 2019 NOTES

20 PROVISIONS FOR POST-EMPLOYMENT BENEFITS

ACCOUNTING POLICY
Assumptions applied for Dec 31, Dec 31,
The Volvo Group’s post-employment benefits, such as pensions, health- actuarial ­calculations 2019 2018
care and other benefits are mainly settled by means of regular payments Sweden
to independent authorities or bodies that assume pension obligations and Discount rate, %1 1.70 2.50
administer pensions through defined contribution plans.
Inflation, % 1.75 1.75
The remaining post-employment benefits are defined benefit plans
where the obligations remain within the Volvo Group and are secured by Expected salary increase, % 2.90 2.90
proprietary pension foundations. The Volvo Group’s defined benefit plans Assumed life expectancy on
retirement at age 65 (Male/Female)
relate mainly to subsidiaries in the USA and comprise both pensions and
other benefits, such as healthcare. Other large-scale defined benefit Retiring today
(member age 65), year 20.90/23.50 20.90/23.50
plans apply to white collar employees in Sweden (mainly through the ITP
pension plan) and employees in France, Great Britain and Belgium. Retiring in 25 years
(member age 40 today), year 22.70/24.60 22.70/24.60
Actuarial calculations are made for all defined benefit plans in order to
determine the present value of the obligation for benefits vested by its USA
current and former employees. The actuarial calculations are prepared Discount rate, %1,2 2.06–3.27 3.35–4.25
annually and are based upon actuarial assumptions that are determined at Inflation, % 2.20 2.20
the balance sheet date each year. Changes in the present value of obliga- Expected salary increase, % 3.00–4.10 2.70–3.50
tions due to revised actuarial assumptions and experience adjustments
Assumed life expectancy on
constitute remeasurements. retirement at age 65 (Male/Female)
Provisions for post-employment benefits in the Volvo Group’s balance Retiring today
sheet correspond to the present value of obligations at year-end, less fair (member age 65), year 20.67/22.44 20.78/22.63
value of plan assets. All changes in the net defined liability (asset) are Retiring in 25 years
recognized when they occur. Service cost and net interest expense (member age 40 today), year 22.65/24.44 22.29/24.02
(income) are recognized in the income statement, while remeasurements
France
such as actuarial gains and losses are recognized in other comprehensive
income. Special payroll tax is included in the ­pension liability in pension Discount rate, %1 0.70–1.20 1.60–2.00
plans in Sweden and ­Belgium. Inflation, % 1.50 1.50
For defined contribution plans, expenses for premiums are recognized Expected salary increase, % 3.00 3.00
in the income statement as incurred. Assumed life expectancy on
retirement at age 65 (Male/Female)
Retiring today
(member age 65), year 19.22/23.05 19.22/23.05
SOURCE OF ESTIMATION UNCERTAINT Y
AND CRITICAL JUDGMENTS Retiring in 25 years
(member age 40 today), year 19.22/23.05 19.22/23.05
Assumptions when calculating post-employment benefits Great Britain
Provisions and costs for post-employment benefits, mainly pensions and Discount rate, %1 2.05 2.90
health care benefits, are dependent on actuarial assumptions. The actuar- Inflation, % 2.75 3.15
ial assumptions and calculations are made separately for each defined
Expected salary increase, % 0.00 0.00
benefit plan. The most significant assumptions are discount rate and infla-
tion. Inflation assumptions are based on an evaluation of external market Assumed life expectancy on
retirement at age 65 (Male/Female)
­indicators. A sensitivity analysis is included in graph 20:6 and shows the
Retiring today
effect on the defined benefit obligations if significant assumptions are
(member age 65), year 21.71/23.51 21.71/23.51
changed. There are also other assumptions made such as salary increases,
Retiring in 25 years
retirement rates, mortality rates, health care cost trends rates and other
(member age 40 today), year 23.97/26.30 23.97/26.30
factors. The salary increase assumptions reflect the historical trend, the
near-term and long-term outlook and assumed inflation. Retirement and Belgium
mortality rates are based primarily on officially available mortality statis- Discount rate, %1 1.10 1.91
tics. Healthcare cost trend assumptions are based on historical data as Inflation, % 1.50 1.50
well as the near-term outlook and an assessment of likely long-term
Expected salary increase, % 2.55 2.55
trends. The Volvo Group has engaged a global actuary in order to ensure
Assumed life expectancy on
that a professional assessment is made and that assumptions are consist-
retirement at age 65 (Male/Female)
ently developed across jurisdictions. The actuarial assumptions are
Retiring today
reviewed annually by the Volvo Group and ­modified when deemed appro- (member age 65), year 22.02/25.83 22.02/25.83
priate.
Retiring in 25 years
(member age 40 today), year 22.02/25.83 22.02/25.83

The following tables disclose information about defined benefit plans. The
Volvo Group recognizes the difference between the obligations and the
plan assets in the balance sheet. The disclosures refer to assumptions
applied for actuarial calculations, recognized costs during the financial
year and the value of obligations and plan assets at year-end. The tables
also include a reconciliation of obligations and plan assets during the year.
20:1
1 The discount rate for each country is determined by reference to market
yields on high quality corporate bonds. In countries where there is no func-
tioning ­market in such bonds, the market yields on government bonds are
used. The ­discount rate for the Swedish pension obligation is determined by
extra­polating current market rates along the yield curve of mortgage bonds.
2 For all plans except three the discount rate used is within the range
2.92–3.27% (4.01–4.25).

151
 GROUP PERFORMANCE 2019 NOTES

Summary of provisions for Dec 31, Dec 31, Costs for the period, post-employ-
­post–employment benefits 2019 2018 ment b
­ enefits other than pensions 2019 2018

Obligations –68,335 –57,260 Current year service costs 123 95

Fair value of plan assets 50,010 42,327 Interest costs 187 141
Net provisions for post-employment Interest income –25 –2
benefits  –18,325 –14,933 Past service costs 6 2
Gain/loss on settlements – –
20:2
Remeasurements 30 12
Total costs for the period 322 248

Pension costs 2019 2018 20:4

Current year service costs 1,749 1,559

Interest costs 1,602 1,479
Interest income –1,378 –1,253
Past service costs 70 –141
Gain/loss on settlements 3 –6
Pension costs for the period, 
defined benefit plans 2,045 1,638

Pension costs for defined contribution plans 2,986 2,697

Total pension costs for the period 5,031 4,335

20:3

Sweden USA France Great Britain Belgium USA

Pensions Pensions Pensions Pensions Pensions Other benefits

Average duration of the obligations, years 23.9 11.7 13.9 18.6 13.5 10.4

20:5

The analysis below presents the sensitivity of the defined benefit this is not probable, and changes in some of the assumptions may be
­obligations when changes in the applied assumptions for discount rate correlated. Depending on specific plan design and benefit formulas on
and inflation are made. The sensitivity analysis is based on a change in each local plan, the sensitivity effect on the obligation differs for the
an assump­tion while holding all other assumptions constant. In practice, respective assumptions.

Sensitivity
analysis 2019 − EFFECT ON OBLIGATION, SEK M +
If discount rate increases 0.5% If discount rate decreases 0.5%
Sweden Pensions –3,003 2,626

USA Pensions –1,348 1,213

France Pensions –209 193

United Kingdom Pensions –784 689

Belgium Pensions –261 228

USA Other benefits –186 169
Other plans –281 249

If inflation decreases 0.5% If inflation increases 0.5%

Sweden Pensions –3,002 2,619
USA Pensions 0 0
France Pensions –2 2

United Kingdom Pensions –470 469

Belgium Pensions –292 265

USA Other benefits –18 16

Other plans –6 6

20:6

152
 GROUP PERFORMANCE 2019 NOTES

Obligations in defined benefit plans Great USA

Sweden USA France Britain Belgium Other Other
Pensions Pensions Pensions Pensions Pensions benefits plans Total
Obligations opening balance 2018 17,260 18,211 2,947 6,994 2,531 3,478 3,554 54,976
Acquisitions, divestments and other changes 0 –41 –147 – –2 – 144 –46
Current year service costs 658 380 98 9 210 57 242 1,655
Interest costs 464 668 55 193 37 124 78 1,619
Past service costs 157 – –345 21 – – 28 –139
Settlements – – –6 – – – 0 –7
Employee contributions – – – 2 0 21 17 40
Remeasurements:
– Effect of changes in demographic assumptions – –48 –40 –48 195 –45 –35 –22
– Effect of changes in financial assumptions 799 –981 –38 –208 –90 –185 –23 –726
– Effect of experience adjustments 185 114 –240 – 38 122 –38 181
Exchange rate translation – 1,678 127 154 110 310 196 2,576
Benefits paid –477 –1,210 –83 –326 –90 –373 –288 –2,846
Obligations as of December 31, 2018 19,047 18,772 2,328 6,791 2,939 3,508 3,874 57,260
of which
Funded defined benefit plans 18,635 18,077 15 6,793 2,939 – 2,251 48,709
Acquisitions, divestments and other changes –11 35 –2 – – 0 284 305
Current year service costs 734 421 153 2 228 58 276 1,871
Interest costs 470 767 47 205 49 144 107 1,790
Past service costs 17 43 –11 – – 0 26 75
Settlements –103 – –8 – – – 1 –110
Employee contributions – – – – 0 28 49 77
Remeasurements:
– Effect of changes in demographic assumptions – –110 –14 –64 – –214 –8 –409
– Effect of changes in financial assumptions 3,947 2,319 300 877 364 350 220 8,377
– Effect of experience adjustments 333 69 –29 – 85 –16 2 445
Exchange rate translation – 679 35 510 40 135 111 1,509
Benefits paid –470 –1,321 –65 –253 –144 –372 –229 –2,854
Obligations as of December 31, 2019 23,964 21,675 2,733 8,068 3,562 3,620 4,713 68,335
of which
Funded defined benefit plans –23,517 –21,816 –19 –8,262 –3,561 – –2,790 –59,965

20:7

Fair value of plan assets in funded plans Great USA

Sweden USA France Britain Belgium Other Other
Pensions Pensions Pensions Pensions Pensions benefits plans Total

Plan assets opening balance 2018 12,207 17,488 10 7,241 2,264 – 1,542 40,753
Acquisitions, divestments and other changes – –41 – – –2 – –6 –49
Interest income 330 652 0 201 34 – 39 1,256
Settlements – – – – – – 0 0
Remeasurements –483 –147 2 –367 –106 – –25 –1,126
Employer contributions –4 872 1 72 152 – 129 1,221
Employee contributions – – – 2 0 21 16 40
Exchange rate translation – 1,621 0 159 98 – 70 1,948
Benefits paid –1 –1,175 –1 –326 –70 –21 –122 –1,716
Plan assets as of December 31, 2018 12,048 19,270 13 6,983 2,370 – 1,643 42,327
Acquisitions, divestments and other changes 0 2 – 0 – 33 289 323
Interest income 300 790 0 212 39 – 62 1,403
Settlements – – – – – – –0 0
Remeasurements 1,407 2,693 –0 701 190 – 47 5,038
Asset ceiling – – – –193 – – –30 –223
Employer contributions 924 – 2 60 174 – 276 1,437
Employee contributions – – – – 0 –28 47 19
Exchange rate translation – 700 0 530 33 0 47 1,309
Benefits paid 1 –1,153 –1 –253 –122 –17 –80 –1,624
Plan assets as of December 31, 2019 14,680 22,301 15 8,040 2,685 –12 2,301 50,010

20:8
153
 GROUP PERFORMANCE 2019 NOTES

Net provisions for post-employment benefits Great USA

Sweden USA France Britain Belgium Other Other
Pensions Pensions Pensions Pensions Pensions benefits plans Total

Net provisions for post-employment benefits

as of December 31, 2018 –6,999 497 –2,314 191 –570 –3,508 –2,230 –14,933

of which reported as:

B/S   Net pension assets – 1,223 – 321 – – 5 1,549
B/S   Provisions for post-employment benefits –6,999 –726 –2,314 –130 –570 –3,508 –2,235 –16,482
Net provisions for post-employment benefits
as of December 31, 2019 –9,284 626 –2,718 –28 –877 –3,632 –2,412 –18,325

of which reported as:

B/S   Net pension assets – – – 140 – 1,518 5 1,663
B/S   Provisions for post-employment benefits –9,284 626 –2,718 –167 –877 –5,151 –2,417 –19,988

20:9

Sweden All employees in Sweden benefit from a jubilee awards plan according
The main defined benefit plan in Sweden is the ITP2 plan and it is based to which they receive a certain number of shares after they have rendered
on final salary. The plan is semi-closed, meaning that only new employees 25, 35 and 45 years of services. This plan is accounted for as a share-
born before 1979 enters the ITP2 solution. The Volvo Group’s pension based payment program.
foundation in Sweden was formed in 1996 to secure obligations relating
 ead more in Note 27 Personnel about accounting policy on share-based
R
to retirement pensions for white collar workers in Sweden in accordance
payments.
with the ITP plan. Plan assets amounting to SEK 2,456 M were contrib-
uted to the foundation at its formation, corresponding to the value of the
USA
pension obligations at that time. Since its formation, net contributions of
In the USA, the Volvo Group has tax qualified pension plans, post-retire-
SEK 4,334 M, whereof SEK 924 M during 2019, have been made to the
ment medical plans and non qualified pension plans. The tax qualified
foundation. The plan assets in the Volvo Group’s S ­ wedish pension founda-
pension plans are funded while the other plans are generally unfunded.
tion are invested in Swedish and foreign stocks and mutual funds, and in
There are five funded defined benefit plans, whereof one is closed, one is
interest-bearing securities and alternative assets, in accordance with a
partially closed and three are open to new entrants. All plans are open for
strategic allocation that is determined by the foundation’s Board of Direc-
future accruals. The Volvo Group’s subsidiaries in the USA mainly secure
tors. As of December 31, 2019, the fair value of the foundation’s plan
their pension obligations through transfer of funds to pension plans. The
assets amounted to SEK 14,662 M (12,030), of which 47% (46) was
US Retirement Trust manages the assets related to the five funded plans.
invested in equity instruments. At the same date, retirement pension obli-
The strategic allocation of plan assets must comply with the investment
gations attributable to the ITP plan amounted to SEK 23,492 M (18,611).
policy as decided by the Board of Directors of the Trust. All members of
Swedish companies can secure new pension obligations through
the board are nominated by the company although each member is sub-
­balance sheet provisions or pension fund contributions. Furthermore, a
ject to strict regulatory requirements on fiduciary responsibility. At the
credit insurance policy must be taken out for the value of the obligations.
end of 2019, the total value of pension obligations secured by pension
In addition to benefits relating to retirement pensions, the ITP plan also
plans of this type amounted to SEK 21,816 M (18,077). At the same point
includes, for example, a collective family pension, which the Volvo Group
in time, the total value of the plan assets in these plans amounted to SEK
finances through an insurance policy with the Alecta insurance company.
22,301 M (19,270), of which 12% (12) was invested in equity instru-
According to an interpretation from the Swedish Financial Reporting
ments. The regulations for securing pension obligations ­stipulate certain
Board, this is a multi-employer defined benefit plan. For the fiscal year
minimum levels concerning the ratio between the value of the plan assets
2019, the Volvo Group did not have access to information from Alecta that
and the value of the obligations. During 2019, the Volvo Group contrib-
would have enabled this plan to be recognized as a defined benefit plan.
uted SEK 0 M (872) to the US pension plans.
Accordingly, the plan has been recognized as a defined contribution plan.
The Volvo Group estimates it will pay premiums of about SEK 284 M to
France
Alecta in 2020. The collective consolidation level measures the appor-
In France, the Volvo Group has two types of defined benefit plans,
tionable assets in relation to the insurance commitment. According to
­Indemnité de Fin de Carrière (IFC) and jubilee awards plan. The plans are
Alecta’s consolidation policy for defined benefit pension insurance, the
unfunded. The IFC is compulsory in France. The benefits are based on the
collective consolidation level is normally allowed to vary between 125%
Collective Bargaining Agreement applicable in the company, on the
and 175%. Alecta’s preliminary consolidation ratio amounts to 148%
employee’s seniority at retirement date and on the final pay. The benefit
(142). If the consolidation level falls short or exceeds the normal interval,
payment is due only if employees are working for the company when they
one measure may be to increase the contract price for new subscription or
retire. The jubilee award plan is an internal agreement and the benefit is
to introduce premium reductions.
based on the employee’s seniority career at 20, 30, 35 and 40 years. As
The Volvo Group’s share of the total saving premiums for ITP2 in Alecta
of December 31, 2019 the total value of pension obligations amounted to
as of December 31, 2019 amounted to 0.31% (0.33) and the share of the
SEK 2,733 M (2,328).
total number of active policy holders amounted to 1.76% (1.67).

154
 GROUP PERFORMANCE 2019 NOTES

Great Britain Belgium

In Great Britain, the Volvo Group has five defined benefit pension plans, In Belgium, the Volvo Group has four traditional defined benefit pension
which are all funded. The pension funds are set up as separate legal enti- plans based on final salary, whereof one is closed to new entrants. All plans
ties, which are governed by a trustee board common for all schemes. The are open for future accruals. Two are funded via own pension fund and two
common trustee board is composed of representatives from the employ- are funded via the group insurance product referred to in Belgium as Branch
ees and an independent professional trustee. All plans are closed to new 21. Benefits are paid as a lump sum at retirement. There is also a local profit
entrants and closed for future accruals to existing members. sharing program whereby any pay-outs are contributed to a defined contri-
The allocation of plan assets must comply with the investment strategy bution pension plan managed by the own pension fund or through a group
agreed between the company and the common trustee board. For three insurance. All defined contribution pension plans in Belgium have a statu-
of the plans, if a net surplus is recognized in the balance sheet when the tory minimum return guarantee and are therefore accounted for as defined
pension scheme runs-off, the Volvo Group has an unconditional right to benefit. The strategic asset allocation of plan assets must comply with the
the surplus of that plan or plans. For two plans this is not strictly legally investment policy as decided by the Board of Directors of the pension fund.
the case and therefore an asset ceiling is applied. All board members of the pension fund are nominated by the company. At
At the end of 2019, the total value of pension obligations amounted to the end of 2019, the total value of pension obligations amounted to SEK
SEK 8,068 M (6,791). The total value of the plan assets in these plans 3,562 M (2,939). At the same point in time the plan assets of these plans
amounted to SEK 8,040 M (6,983). amounted to SEK 2,685 M (2,370). During 2019 the Volvo Group contrib-
During 2019, the Volvo Group has made extra contributions to the uted SEK 174 M (152) to the Belgium pension plans.
­pension plans in Great Britain in the amount of SEK 60 M (72).
Investment strategy and risk management
The Volvo Group manages the allocation and investment of pension plan
assets with the purpose of meeting the long term objectives. The main
Plan assets by category as of December 31, 2018 objectives are to meet present and future benefit obligations, provide
­sufficient liquidity to meet such payment requirements and to provide a
Cash and cash equivalents, 1,185 (3%) total return that maximizes the ratio of the plan assets in relation to the
Equity instruments, 9,102 (22%) plan liabilities by maximizing return on the assets at an appropriate level of
Debt instruments, 25,062 (59%) risk. The final investment decision often resides with the local trustee, but
Real estate, 971 (2%) the investment policy for all plans ensures that the risks in the investment
Investments funds, 3,784 (9%)
portfolios are well diversified. The primary risk mitigating activity in the
long run is to close defined benefit plans to new entrants or to future
Assets held by insurance company, 1,097 (3%)
accruals for existing members and replace with defined contribution plans
Other assets, 1,126 (3%)
when and where possible. The risks related to already accrued pension
obligations, e.g. longevity and inflation, as well as buy out premiums and
matching strategies are monitored on an ongoing basis in order to further
Plan assets by category as of December 31, 2019 limit the Volvo Group’s exposure where and when possible.
In the last couple of years, some of the defined benefit plans have been
Cash and cash equivalents, 2,356 (5%) closed to new entrants and replaced by defined contribution plans in order
Equity instruments, 12,405 (25%) to reduce risk for the Volvo Group.
Debt instruments, 30,982 (62%) In Sweden, the minimum funding target is decided by PRI Pensions­
Real estate, 1,329 (3%)
garanti. This is mandatory in order to stay in the system and get insurance for
the pension liability. The contributions usually represents one year’s new
Assets held by insurance company, 1,532 (3%)
accrued benefits plus any shortfall towards the minimum funding target,
Other assets, 1,629 (3%)
unless there is a surplus according to local scheme valuation principles.
In the USA, the minimum funding target is decided by the ­company in
order to avoid penalties, keep flexibility and avoid extensive filing with the
20:10 Internal Revenue Service and participants. The minimum contributions
usually represent one year’s accrued benefits plus a seventh of any deficit,
unless a scheme is showing a surplus according to local scheme valuation
principles.
Fair value of plan assets Dec 31, 2019 Dec 31, 2018 In Great Britain there is no minimum funding ratio. There is a regulatory
requirement for each scheme to perform triennial valuations whereby
Cash and cash equivalents 2,349 1,185
any scheme showing a deficit must develop a recovery plan that returns
With a quoted market price
the scheme to a fully funded basis within a reasonable timeframe. The
Equity instruments 10,047 9,102
­recovery plan shall be agreed with the company and submitted to the reg-
Debt instruments 30,288 25,062
ulator for approval.
Real estate 175 186 In Belgium the minimum funding level is regulated by law and monitored
Derivatives  –19 –36 by the financial supervisory authority, FSMA. The framework for the mini-
Investments funds – 2,495 mum funding requirement is based on a discount rate, which is based on the
Other 1,610 1,108 expected return of the plan assets. The pension fund must be fully funded on
With an unquoted market price this basis at all times. The contribution policy of the pension fund is designed
Other 5,784 3,224 to provide stability in contributions over the duration of the plan.
Total 50,233 42,327 In 2020, the Volvo Group estimates to transfer an amount of SEK 0.5–
1.5 billion to pension plans.
20:11

155
 GROUP PERFORMANCE 2019
21 OTHER PROVISIONS
ACCOUNTING POLICY
Provisions are recognized in the balance sheet when a legal or construc-
tive obligation exists as a result from a past event and it is probable that an
outflow of resources will be required to settle the obligation and the
amount can be reliably estimated. When these criteria are not met, a con-
tingent liability may be recognized.
Provisions for product warranty
Provisions for product warranty are recognized as cost of sales and include
contractual warranty, technical goodwill warranty (warranty cover in excess
of contractual warranty or campaigns which is accepted as a matter of pol-
icy or normal practice in order to maintain a good business relation with the
customer) and campaign warranty. Provisions for contractual warranty are
recognized when the products are sold, while provisions for technical war-
ranty are determined based on historical statistics. Provision for campaigns
in connection with specific quality problems are recognized when the cam-
paign is decided.
Provisions for extended coverage
An extended coverage is a product insurance sold to a customer to cover
a product according to specific conditions for an agreed period as an addi-
tional insurance to the factory contractual warranty. The provision is
intended to cover the risk that the expected cost of providing services
under the extended coverage contract exceed the expected revenue.
Provisions in insurance operations
Volvo Group has a captive insurance company and the provisions in insur-
ance operations are related to third party claims addressed to companies
within the Volvo Group. The claims reserve also includes a provision for
unreported losses based on past experience. The unearned premium
reserve is reported as an accrued expense within other current liabilities.
Provisions for restructuring costs
A provision for decided restructuring measures is recognized when a
detailed plan for the implementation of the measures is complete and
when this plan is communicated to those who are affected. A provision
and costs for termination benefits as a result of a voluntary termination
program is recognized when the employee accepts the offer. Normally
restructuring costs are included in other operating income and expenses.
Provisions for residual value risks
Residual value risks are the risks that the Volvo Group in the future would
have to dispose used vehicles at a loss if the price development of these
products is worse than expected when the contracts were entered. The
residual value risks pertains to operating lease contracts and sales trans-
actions with residual value commitments (buybacks and tradebacks)
where the Volvo Group has a residual value commitment. The majority of
these contracts are recognized as assets under operating leases or as
right of return asset in the balance sheet. During the period, the deprecia-
ble amount is adjusted through the income statement to correspond to
estimated future net realizable value to continuously reflect potential
residual value risks at the end of the contract period.
Read more in Note 13 Tangible assets about residual value risks.
156
NOTES
Residual value commitments that are independent from the sales transac-
tion are not recognized as assets under operating leases or as right of
return in the balance sheet, hence the potential residual value risks related
to these contracts are recognized as provisions. To the extent the residual
value exposure does not meet the definition of a provision, the gross expo-
sure is reported as a contingent liability.
Read more in Note 24 Contingent liabilities.
Provisions for service contracts
Service contracts offer the customer preventive maintenance according
to an agreed service plan. The provision is intended to cover the risk that
the expected cost of providing services and repairs under the service
contract exceeds the expected revenue.
SOURCE OF ESTIMATION UNCERTAINT Y
AND CRITICAL JUDGMENTS
The uncertainties about the amount or timing of outflows vary for different
kind of provisions. Regarding provisions for product warranty, extended
coverage, residual value risks and service contracts, the provisions are
based on historical statistics and estimated future costs, why the provided
amount has a high correlation with the outflow of resources. Regarding
provisions for disputes, like tax and legal disputes, the uncertainty is higher.
Provisions for product warranty
Warranty provisions are estimated with consideration of historical statis-
tics with regard to known changes in warranty claims, warranty periods,
the average time-lag between faults occurring until claims are received by
the company and anticipated changes in quality indexes. The actual out-
come of product warranties may deviate from the expected outcome and
materially affect the warranty costs and provisions in future periods. Re­
funds from suppliers, that decrease the Volvo Group’s warranty costs, are
recognized to the extent these are considered to be certain.
Provisions for legal proceedings
The Volvo Group regularly reviews the development of significant out-
standing legal disputes in which the Volvo Group companies are parties,
both regarding civil law and tax disputes, in order to assess the need for
provisions and contingent liabilities in the financial statements. Among
the factors that the Volvo Group considers in making decisions on provi-
sions and contingent liabilities are the nature of the dispute, the amount
claimed, the progress of the case, the opinions of legal and other advisers,
experience in similar cases, and any decision of the Volvo Group’s man-
agement as to how the Volvo Group intends to handle the dispute. The
actual outcome of a legal dispute may deviate from the expected outcome
of the dispute. The difference between actual and expected outcome of a
dispute might materially affect future financial statements, with an
adverse impact upon the Volvo Group’s operating income, financial posi-
tion and liquidity.
Provisions for legal disputes are included within other provisions in
table 21:1 .
Read more in Note 24 Contingent liabilities.
 GROUP PERFORMANCE 2019 NOTES

Carrying Acquired and Other Carrying Of which Of which

value as of divested Trans­lation reclassi­ value as of due within due after
Dec 31, 2018  Provisions Reversals Utilizations companies differences fications Dec 31, 2019 12 months 12 months
Provisions
for product
warranty1,2 19,484 12,248 –2,406 –9,820 – 344 –1,089 18,762 8,232 10,530
Provisions
for extended
coverage 2, 3 1,055 493 –400 –243 – 35 –321 619 138 481
Provisions
in insurance
operations 613 155 –26 –45 – 23 0 720 – 720
Provisions for
restructuring
costs  79 129 –27 –6 – 2 –6 170 152 18
Provisions
for residual
value risks 483 1,096 –523 –489 – 29 –36 559 279 281
Provisions
for service
­contracts 502 437 –197 –314 – 23 –36 416 299 116
Other
provisions 4 5,821 4,896 –1,606 –3,312 – 111 –665 5,246 2,806 2,439
B/S  Total 28,037 19,455 –5,185 –14,228 – 566 –2,152 26,492 11,907 14,585

21:1

1 Including a provision of SEK 7 billion for emission control component in 2018. For more information see below.
2 Other reclassifications includes reclassification to assets held for sale (SEK 1,120 M), Read more in Note 3 Acquisitions and divestments of shares in subsidiaries.
3 Other reclassifications includes reclassification to deferred revenue extended coverage.
4 Other reclassifications includes reclassification to tax liability (SEK 295 M) and to assets held for sale (SEK 174 M).

The Volvo Group has detected that an emissions control component used in
certain markets and models, may degrade more quickly than expected,
affecting the vehicles emission performance negatively. The Volvo Group
made a provision of SEK 7 billion which impacted the operating income for
2018, relating to the estimated costs to address the issue. Negative cash
flow effects have started in 2019 and will gradually ramp up in the coming
years. The Volvo Group will continuously assess the size of the provision as
the matter develops.
Other provisions mainly includes provisions for ­legal disputes, provisions for
externally issued credit guarantees and other ­provisions, unless separately
specified and commented in the table and text.
Long-term provisions as above are expected to be settled within 2 to 3
years.

157
 GROUP PERFORMANCE 2019 NOTES

22 LIABILITIES

ACCOUNTING POLICY Non-current liabilities

Loans are valued at amortized cost using the effective interest rate
method. A hybrid bond issued by the Volvo Group is classified as debt in
the Volvo Group’s accounts as it constitutes a contractual obligation to
make interest payments and repay the nominal amount of the debt to the
holder of the instrument.
Read more in Note 30 Financial instruments for accounting policies
related to financial instruments.
The tables below disclose the Volvo Group’s non-current liabilities with
the largest loans listed by currency. Loans in the Volvo Group’s subsidiaries
are mainly denominated in local currencies through Volvo Group Treasury
which minimizes the currency exposure in the individual companies. Volvo
Group Treasury uses various derivatives to facilitate lending and borrowing
in ­different currencies without increasing the risk for the Volvo Group.
Read more in Note 4 Goals and policies in financial risk management.

Non-current bond loans and other loans Actual interest rate Effective interest rate
Currency/start year/maturity Dec 31, 2019, % Dec 31, 2019, % Dec 31, 2019 Dec 31, 2018

Bond loans
EUR 2012–2019/2021–20781 0.00–4.79 0.00–4.79 39,373 37,965
SEK 2018–2019/2021–2023 0.42–1.51 0.42–1.51 23,462 21,151
NOK 2019/2022-2024 2.58–2.85 2.61–2.88 1,587 –
HKD 2019/2024 2.31 2.31 866 –
USD 2019/2029 2.96 2.96 466 –
B/S   Total bond loans2,3 65,754 59,115

Other loans
USD 2014–2019/2021–2024 2.09–3.03 2.31–3.25 12,936 11,086
EUR 2014–2018/2022–2025 0.00–2.34 0.00–2.34 6,919 6,864
CAD 2019/2021-2022 2.59–3.02 2.61–3.05 1,925 330
MXN 2017/2021 8.75 9.11 594 1,322
JPY 2010-2019/2024–2030 0.33–0.49 0.33–0.49 903 863
BRL 2013–2015/2024–2027 3.00–12.75 3.00–12.75 2,814 3,331
AUD 2017–2019/2021–2023 1.75–2.01 1.76–2.03 448 651
CNY 2017–2019/2021–2022 4.05–5.66 4.05–5.66 1,497 1,377
Loans in other currencies 972 738
Lease liabilities 4 5,334 761
Revaluation of outstanding derivatives to SEK 5 1,521 772
B/S   Total other loans2,3 35,862 28,095

22:1

Other non-current liabilities Dec 31, 2019 Dec 31, 2018

Deferred leasing income 6

5,123 4,829
Residual value liabilities6 9,829 9,556
Deferred service revenue6 13,049 11,362
Refund liabilities6 1,265 1,454
Advances from customers6 2,215 2,021
Outstanding interest and currency risk derivatives5     440 195
Other liabilities     4,390 3,533
B/S   Total other liabilities 36,311 32,949

22:2

1 Including the hybrid bond of EUR 1,5 billion. This bond consists of two tranches, EUR 0.9 billion with a first call in 2020 and final maturity in 2075 and EUR
0.6 billion with a first call in 2023 and final maturity in 2078.
2 Loans to finance the credit portfolio in Financial Services amounted to SEK 50,142 M (43,743) in bond loans and SEK 28,538 M (25,264) in other loans.
3 Non-current loans of SEK 12,521 M (10,685) were secured by assets pledged. Read more in Note 23 Assets pledged.
4  Read more in Note 31 Changes in Volvo Group Financial Reporting 2019. The opening balance for 2019 is restated due to the implementation of IFRS 16.
Part of lease liabilities were included in the 2018 annual report as finance leases.
5  Read more in Note 30 Financial instruments, table 30:1 regarding non-current part of ­outstanding interest and currency risk derivatives.
6  Read more in Note 7 Revenue regarding contract and refund liabilities, and sales with residual value commitments.

158
 GROUP PERFORMANCE 2019 NOTES

2 C urrent loans of SEK 5,516 M (4,688) were secured by assets pledged. ­­

Read more in Note 23 Assets pledged.
Maturity Not utilized 3  Read more in Note 31 Changes in Volvo Group Financial Reporting
Bond loans and non-current credit 2019. The opening balance for 2019 is restated due to the implementation
Year other loans facilities of IFRS 16. Part of lease liabilities were included in the 2018 annual report
as finance leases.
2021 47,299 5,000 4  Read more in Note 30 Financial instruments, table 30:1 regarding
2022 20,883 1,522 current part of ­outstanding interest and currency risk derivatives.
2023 10,165 –
2024 3,637 36,518 Other current loans include current maturities of non-current loans of SEK
2025 989 – 15,512 M (13,979).
2026 or later 18,644 –
Total 101,616 43,039
Other current liabilities Dec 31, Dec 31,
22:3 2019 2018

Read more in Note 14 Leasing, table 14:5 for maturities of non-current Advances from customers1 5,493 4,505
lease liabilities.
Wages, salaries and withholding taxes 11,957 12,012
Read more in Note 15 Customer-financing receivables, table 15:2 for
maturities of non-current customer-financing receivables. VAT liabilities 3,358 3,140
Accrued expenses for dealer
The Volvo Group issued a hybrid bond in 2014, amounting to EUR 1.5 bonuses and rebates1 6,647 6,211
billion with an original maturity of 61.6 years, in order to further strengthen Other accrued expenses 11,867 10,995
the Volvo Group’s balance sheet and prolong the maturity structure of the Deferred leasing income1 3,036 2,681
debt portfolio. The predominant part of non-current loans that mature in Deferred service revenue1 3,371 2,908
2021 is an effect of the Volvo Group’s normal business cycle, with shorter Other deferred income1 1,184 1,067
duration in the Financial Services portfolio compared to Industrial Opera- Residual value liabilities1 4,775 4,691
tions. Refund liabilities1 461 458
Granted but not utilized credit facilities consist of stand-by facilities for Other financial liabilities 155 233
loans. A fee is charged for granted credit facilities and recognized in the Interest and
income statement within other financial income and expenses. currency risk ­derivatives 2 140 138
Other liabilities 5,059 4,961
Read more in Note 9 Other financial income and expenses.
B/S   Total other liabilities 57,502 53,999

Current liabilities
22:5

1  Read more in Note 7 Revenue regarding contract and refund liabilities,

and sales with residual value commitments.
Current bond loans and other loans Dec 31, Dec 31, 2  Read more in Note 30 Financial Instruments, table 30:1 regarding
2019 2018
current part of ­outstanding interest and currency risk derivatives.
Bond loans 31,759 26,657
Table 22:5 presents the Volvo Group’s other current liabilities. In addition
B/S   Total bond loans1,2 31,759 26,657
to this, non interest-bearing current liabilities also include trade payables
Other loans 22,254 21,382 of SEK 66,866 M (73,630) and current tax liabilities of SEK 3,493 M
Lease liabilities3 1,755 199 (3,749). A reclassification has been made during 2019 from trade paya-
Revaluation of outstanding derivatives to SEK4 367 408 bles to liabilities held for sale of SEK 4,774 M, Read more in Note 3
B/S   Total other loans1,2 24,377 21,989 Acquisitions and divestments of shares in subsidiaries.
Non interest-bearing current liabilities amounted to SEK 138,267 M
22:4 (131,378), or 71% (73) of the Volvo Group’s total current liabilities.
1 Loans to finance the credit portfolio in Financial Services amounted to SEK
31,759 M (26,473) in bond loans and SEK 20,772 (16,545) in other loans.

23 ASSETS PLEDGED

Non-current and current loans of SEK 18,037 M (15,373) were secured

by assets pledged to an amount of SEK 21,220 M (15,988).
Assets pledged Dec 31, Dec 31, Under the terms of asset-backed securitizations, SEK 17,766 M (15,144)
2019 2018
of securities have been issued tied to US-based loans, secured by
Property, plant and equipment mort- ­customer-financing receivables, SEK 20,834 M (15,677), recognized on
gages 70 70 the balance sheet with trucks and construction equipment assets as
Assets under operating leases 317 241 ­collaterals, whereof SEK 12,876 M (9,423) were signed in 2019.
Customer-financing receivables 20,834 15,677
Read more in Note 22 Liabilities.
Total assets pledged 21,220 15,988

23:1
159
 GROUP PERFORMANCE 2019 NOTES

24 CONTINGENT LIABILITIES

Residual value commitments amounted to SEK 1,118 M (1,766) and were

ACCOUNTING POLICY
Contingent liabilities
A contingent liability is recognized for a possible obligation, for which it is
not yet confirmed that a present obligation exists that could lead to an
outflow of resources. Alternatively, there is a present obligation that does
not meet the definitions of a provision or a liability as it is not probable that
an outflow of resources will be required to settle the obligation or a suffi-
ciently reliable estimate of the amount of the obligation cannot be made.
attributable to sales transactions with residual value commitments (buy-
backs and tradebacks) that are independent from the sales transaction
and therefore not recognized as assets in the balance sheet. The amount
corresponds to the gross exposure and has not been reduced by the esti-
mated net selling price of used products taken as collaterals. To the extent
the used products pertaining to those transactions are expected to be
disposed at a loss, a provision for residual value risk is recognized.
 ead more in Note 21 Other p
R ­ rovisions about provisions for residual
value risks.

Other contingent liabilities amounted to SEK 5,017 M (5,117) and include

for example bid and performance clauses and legal proceedings.
 Contingent liabilities Dec 31, Dec 31,
2019 2018
Legal proceedings
Credit guarantees issued for In January 2011, the Volvo Group and a number of other companies in the
customers and others 2,944 2,435 truck industry became part of an investigation by the European Commis-
Tax claims 4,653 4,929 sion regarding a possible violation of EU antitrust rules. The Volvo Group
Residual value commitments 1,118 1,766 co-operated fully with the European Commission in the investigation. In
Other contingent liabilities 5,017 5,117 July 2016, the Volvo Group reached a settlement with the European Com-
Total contingent liabilities 13,732 14,247 mission in the investigation. Following the adoption of the European
Commission’s settlement decision, the Volvo Group has received and will
24:1 be defending itself against numerous private damages claims brought by
customers and other third parties alleging that they suffered loss by rea-
Total contingent liabilities at December 31, 2019, amounted to net son of the conduct covered in the decision. The claims are being brought
SEK 13,732 M (14,247) and included no contingent assets. in various countries by claimants either acting individually or as part of a
wider group or class of claimants. Further claims are likely to be com-
Credit guarantees issued amounted to SEK 2,944 M (2,435). The recog- menced. At this stage, it is not possible to make a reliable estimate of any
nized amount for credit guarantees corresponds to the gross exposure and liability that could arise from any such proceedings. An adverse outcome
has not been reduced by the value of counter guarantees received or other or outcomes of some or all of the litigation, depending on the nature and
collaterals such as the right to repossess the products. The value of coun- extent of such outcomes, may have a material impact on the Volvo Group’s
ter guarantees and other collaterals reducing the exposure is dependent on financial results.
the development of used products prices and on the possibility to repos- The Volvo Group is also involved in a number of legal proceedings other
sess the products. than those described above. The Volvo Group’s assessment is that such
A major part of the credit guarantees pertains to the credit guarantees other legal proceedings in aggregate are not likely to entail any risk of
related to Chinese dealers and retail customers within Construction having a material effect on the Volvo Group’s financial position.
­Equipment. The increase compared to last year is mainly an effect of
higher sales in Construction Equipment in China. Detected premature degradation of emissions control component
The Volvo Group has detected that an emissions control component used
Tax claims amounted to SEK 4,653 M (4,929) and pertain to charges in certain markets and models, may degrade more quickly than expected,
against the Volvo Group for which the criteria for recognizing a tax liability affecting the vehicles emission performance negatively. The Volvo Group
or a provision were not met. Global companies such as the Volvo Group has made a provision that will be continuously assessed as the matter
are occasionally involved in tax processes of varying scope and in various develops.
stages. Volvo Group regularly assesses these tax processes. When it is
Read more in Note 21 Other ­provisions.
probable that additional taxes must be paid and the outcome can be rea-
sonably e ­ stimated, the required provision is made. Out of total tax claims,
SEK 1.8 billion (1.8) is related to a transfer price audit in Brazil and SEK 1.2
billion (1.1) to a custom duties audit in India.

160
 GROUP PERFORMANCE 2019 NOTES

25 TRANSACTIONS WITH RELATED PARTIES

 ead more in Note 5 Investments in joint ventures, associated companies

R
ACCOUNTING POLICY and other shares and participations.
 ead more in Corporate Governance Report about Board of Directors
R
The Volvo Group engages in transactions with some of its related parties, and Group Executive Board.
such as associated companies, joint ventures and other related compa-
nies. The transactions arise in the ordinary course of business and are con-
ducted on commercial terms and market prices. It mainly consist of sales The Volvo Group’s transactions with related parties are presented in table
of vehicles, parts, equipment and services as well as purchases of parts, 25:1 and 25:2.
engines and vehicles for resale. Transactions between AB Volvo and its
subsidiaries have been eliminated in the Group and are not disclosed in
this note. Transactions with Board of Directors or Group Executive Board
consist of remunerations, which are disclosed in note 27 Personnel.

Sales of goods, Purchases of goods,

services and other income services and other expense
2019 2018 2019 2018

Associated companies 2,569 1,544 142 100

Joint ventures 1,709 1,695 891 1,023
Other related companies 105 96 864 853

25:1

Receivables Payables
31 Dec, 2019 Dec 31, 2018 Dec 31, 2019 Dec 31, 2018

Associated companies 595 290 73 33

Joint ventures 214 353 38 166
Other related companies 118 80 402 252

25:2

26 GOVERNMENT GRANTS

In 2019, government grants of SEK 746 M (649) were received, and SEK
ACCOUNTING POLICY 890 M (636) were recognized in the income statement. The amount
includes tax credits of SEK 411 M (371) related to product development,
Government grants are financial grants from governmental or supra­ which were primarily received in France and in the United States. Other
national bodies that is received in exchange for fulfillment of certain con- grants were mainly received from Swedish, Chinese and US governmen-
ditions by the Volvo Group. tal organizations and from the European Commission.
Government grants related to assets are presented in the balance sheet
either as deferred income or as a deduction of the carrying amount of the
related assets. ­Government grants related to income are reported as a
deferred income in the balance sheet and recognized in the income state-
ment to match the related costs. If the costs are incurred before the grants
have been received, but there is an agreement that grants will be received,
grants are recognized in the income statement to match the related costs.

161
 GROUP PERFORMANCE 2019
27 PERSONNEL
ACCOUNTING POLICY
Incentive programs
The Volvo Group has a long-term and a short-term incentive program that is
accounted for in accordance with IAS 19 Employee benefits. During the
vesting period, the incentive program is recognized as an expense and as a
short-term liability.
The Volvo Group also has a share-based incentive program for the year
2015. The fair value of the equity-settled payments is determined at the
grant date, recognized as an expense during the vesting period and offset
in equity. The fair value is based on the share price reduced by dividends
connected with the share during the vesting period.
The cash-settled payment is revalued at each balance sheet date and
is recognized as an expense during the vesting period and as a short-term
liability.
Remuneration policy decided at the Annual General
Meeting in 2019
The Annual General Meeting of 2019 decided upon a policy on remunera-
tion and other employment terms for the members of the Volvo Group
Executive Board. The decided principles are summarized as follows:
The remuneration and the other terms of employment of the Executives
shall be competitive so that the Volvo Group can attract and retain com-
petent Executives. The total remuneration to Executives consists of fixed
salary, short-term and long-term incentives, pension and other benefits.
Short-term and long-term incentives shall be linked to predetermined and
measurable criteria relating to EBIT and cash flow targets for the Volvo
Group, devised to promote the long-term value creation of the Volvo
Group and strengthen the link between achieved performance targets
and rewards. The criteria for short-term and long-term incentives shall be
determined by the Board annually.
Short-term incentive may, as regards the President & CEO, amount to
a maximum of 100% of the fixed salary and, as regards other Executives,
a maximum of 80% of the fixed salary.
Long-term incentive may, as regards the President & CEO, amount to a
maximum of 100% of the fixed salary and, as regards other Executives, a
maximum of 80% of the fixed salary. The long-term incentive program for
the Volvo Group’s top executives, including the Executives, is cash-based.
Awards under the program, based on how well the performance targets
are achieved, are disbursed in cash to the participants on the condition
that they invest the net award in AB Volvo shares and that they retain the
shares for at least three years. In addition, the Executives should be
required to accrue (if they do not already have such a holding) and retain a
holding of AB Volvo shares with a market value of at least one year’s pre-
tax fixed salary (two years’ for the President and CEO), subject to a right
for the Board of Directors to grant such exceptions as the Board deems
appropriate. For the avoidance of doubt, Executives shall not be under any
obligation to purchase additional shares, other than those purchased in
connection with the long-term incentive program, to satisfy the accrual
and retention requirement.
Any new share-based incentive program will, where applicable, be resolved
by the General Meeting, but no such program is currently p
­ roposed.
For Executives resident in Sweden, the notice period upon termination
by the company shall not exceed 12 months and the notice period upon
termination by the Executive shall not exceed 6 months. In addition, in the
event of termination by the company, the Executive may be entitled to a
maximum of 12 months’ severance pay.
Executives resident outside Sweden or resident in Sweden but having
a material connection to or having been resident in a country other than
162
NOTES
Sweden may be offered notice periods for termination and severance pay-
ment that are competitive in the country where the Executives are or have
been resident or to which the Executives have a material connection,
prefer­ably solutions comparable to the solutions applied to Executives
resident in Sweden.
The Board of Directors may deviate from this policy if there are special
reasons to do so in an individual case.
Fees paid to the Board of Directors
According to a resolution adopted at the Annual General Meeting 2019,
fees to the Board of Directors appointed at the Annual General Meeting
for the period until the close of the Annual General Meeting 2020 shall be
paid as follows: The Chairman of the Board should be awarded SEK
3,600,000 (3,500,000) and each of the other members SEK 1,060,000
(1,030,000) with exception of the President and CEO of AB Volvo, who
does not receive a director’s fee. In addition, SEK 380,000 (360,000)
should be awarded to the Chairman of the Audit Committee and SEK
175,000 (165,000) to each of the other members of the Audit Commit-
tee, and SEK 160,000 (150,000) to the Chairman of the Remuneration
Committee and SEK 115,000 (110,000) to each of the other members of
the Remuneration Committee. Finally, SEK 190,000 (180,000) should
be awarded to the Chairman of the Technology and Business Transforma-
tion Committee and to the other members of the Technology and Busi-
ness Transformation Committee SEK 160,000 (155,000) each.
Terms of employment and remuneration to the CEO
Fixed salary, short-term and long-term incentives
The President and CEO is entitled to a remuneration consisting of a fixed
annual salary and short-term and long-term incentives. During the finan-
cial year 2019, the short-term and long-term incentives are based on EBIT
and cash flow for the Volvo Group. The short-term and long-term incen-
tives, each, amounts to a maximum of 100% of the annual base ­salary.
For the financial year 2019, Martin Lundstedt received a fixed salary
including vacation payment of SEK 14,924,697 (14,578,361) and a short-
term incentive of SEK 13,066,469 (12,471,729). The short-term incentive
was 88.8% (87.7) of the annual base salary. Other benefits, mainly per-
taining to car and housing, amounted to SEK 369,530 (300,184) in 2019.
Martin Lundstedt participated in the long-term share-based incentive
program decided by the Annual General Meeting 2014. During 2019,
19,577 (0) shares granted under the 2015 program corresponding to a
taxable value of SEK 2,531,187 (0) have been allotted.
Martin Lundstedt was also participating in the long-term incentive pro-
gram decided by the Board of Directors in 2019. During the financial year
the outcome of the long-term incentive program amounted to SEK
13,802,062 (10,018,624), which was 93.8% (70.5) of the base salary.
The full net amount shall be invested in Volvo B shares. There is to be no
pay-out of the amount if the Annual Meeting held in 2020 decides not to
distribute any dividends to the shareholders for 2019.
Pensions
The President and CEO is covered both by pension benefits provided
under collective bargain agreements and by the Volvo Management
­Pension (VMP) and Volvo Executive Pension (VEP) plans. Both VMP and
VEP are defined contribution plans. The pensionable salary consists of the
annual salary, vacation payment and a calculated short-term variable pay.
The premium for the VMP plan is SEK 30,000 per year plus 20% of pen-
sionable salary over 30 income base amounts and the premium for the
VEP plan is 10% of pensionable salary. There are no commitments other
than the payment of the premiums. In addition to the collective bargain
agreement (ITP), the disability pension is 25% of salary between 7,5 price
base amounts and 20 income base amounts, 37.5% of salary between
 GROUP PERFORMANCE 2019
20–30 income base amounts and 50% of base salary above 30 income
base amounts. The right to disability pension is conditional to employ-
ment and will cease upon termination of employment.
The President and CEO is also covered by Volvo Företags­pension, a
defined contribution plan for additional retirement benefits. The premium
is negotiated each year. For 2019, the premium amounted to SEK 8,280
(8,016) for the full year.
Total pension premiums for Martin Lundstedt amounted to SEK
6,916,015 (6,084,607) in 2019.
Severance payments
Martin Lundstedt has a 12 months notice period upon termination by
AB Volvo and a 6 months notice period upon termination on his own
initiative. If terminated by the company, Martin Lundstedt is entitled to a
severance payment equivalent to 12 months’ salary. In the event of new
employment during the severance period, the severance pay is reduced
with an amount equal to 100% of the income from the new employment.
Remuneration to the Group Executive Board
Fixed salary, short-term and long-term incentives
Members of the Group Executive Board receive short-term and long-term
incentives in addition to fixed salaries. During the financial year 2019, the
short-term and long-term incentives are based on EBIT and cash flow for
the Volvo Group. In 2019, short-term and long-term incentives, for Group
Executive Board members excluding the CEO, could each amount to a
maximum of 80% of the annual base salary.
For the financial year 2019, fixed salaries amounted to SEK 82,951,795
(73,510,127) and a compensation in connection with employment in the
Group amounted to SEK 3,000,000 (4,590,000). Short-term incentive
amounted to SEK 56,751,686 (49,954,990) for Group Executive Board
members excluding the CEO. The short-term incentive was in average
69.0% (69.3) of the annual base salary. The Group Executive Board com-
prised, excluding the CEO, of 13 (12) members at the beginning and 13
(13) at the end of the year. Other benefits, including company cars, hous-
ing and costs for a change of tax status of an expatriate, amounted to SEK
21,070,469 (12,575,800) in 2019.
Group Executive Board members participated in the long-term share-
based incentive program decided by the Annual General Meeting 2014.
During 2019, 73,508 (132,808) shares granted under the 2015 program
corresponding to a taxable value of SEK 7,669,435 (20,295,124) have
been allotted to Group Executive Board members.
The Group Executive Board also participated in the long-term incentive
program decided by the Board of Directors in 2019. During the financial
year the outcome of the long-term incentive program for the Group Exec-
utive Board members, excluding the CEO, amounted to SEK 61,737,045
(40,610,751) of which the full net amount shall be invested in Volvo B
shares. The long-term incentive was 75.0% (56.4) of the annual base sal-
aries. There is to be no pay-out of the amount if the Annual Meeting held
in 2020 decides not to distribute any dividends to the shareholders for
2019.
Pensions
Group Executive Board members enrolled in the Swedish pension plan are
also covered by a defined contribution plan, Volvo Executive Pension
(VEP) plan with pension premium payments at the longest to the age of
65 years. The premium is 10% of pensionable salary. As a complement to
the collective bargaining agreement regarding occupational pension,
­members of the Group Executive Board enrolled in the Swedish pensions
plan and who are born before 1979 are also covered by a defined contribu-
tion pension plan, Volvo Management Pension (VMP). The ­premium is
SEK 30,000 per year plus 20% of pensionable salary over 30 income
NOTES
base amounts. The pensionable salary consists of the annual salary, vaca-
tion payment and a calculated short-term variable pay. Pension premiums
for the Group Executive Board, excluding the CEO, amounted to SEK
28,993,736 (24,857,202) in 2019.
Severance payments
The employment contracts for Group Executive Board members contain
rules governing severance payments when the company terminates the
employment. For Executives resident in Sweden, the notice period upon
termination by the company shall not exceed 12 months and the notice
period upon termination by the Executive shall not exceed 6 months. In
addition, in the event of termination by the company, the Executive is
­entitled to a maximum of 12 months’ severance pay.
Executives resident outside Sweden or resident in Sweden but having
a material connection to or having been resident in a country other than
Sweden may be offered notice periods for termination and severance pay-
ment that are competitive in the country where the Executives are or have
been resident or to which the Executives have a material connection,
prefer­ably solutions comparable to the solutions applied to Executives
resident in Sweden.
Volvo Group’s total costs for remuneration and benefits
to the Group Executive Board
The total costs for remuneration and benefits to the Group Executive
Board amounted to SEK 375 M (313) and pertained to fixed salary, short-
term and long-term incentives, other benefits and pensions. It also
included social fees on salaries and benefits, special payroll tax and addi-
tional costs for other benefits. The cost related to the long-term share-
based incentive program is reflected over the vesting period and
amounted to SEK –2 M (1) for 2019. The remuneration model of the Volvo
Group is to a main part designed to follow changes in the profit­ability of
the Group.
Long-term incentive programs
Long-term share-based incentive program 2014-2015
The Annual General Meeting held in 2014 approved a long-term share-
based incentive program for up to 300 Group and Senior Executives and
comprising the years 2014 to 2016. In 2016 the Board of Director’s
approved this program to be replaced by a new program as from 2016
with the effect of terminating current program one year in advance.
­During 2019, the program was terminated and all of the remaining shares
granted under the programs have been allotted to the participants.
Long-term incentive program valid from 2016
The Board of Directors have in 2016 approved a long-term cash-based
incentive program comprising the top 300 Executives in the Volvo Group.
This program replaces the previous long-term share-based incentive
­program approved in 2014. A prerequisite for participation in the program
is that the participants shall undertake to invest the annual net (after tax)
payout amounts under the plan in Volvo B-shares and to hold those shares
for at least three years.
Long-term incentive may, as regards the President & CEO, amount to a
maximum of 100% of the fixed salary and, as regards other Executives, a
maximum of 80% of the fixed salary. There will however be no payout
under the long-term incentive program if the Annual General Meeting that
is held in the year following the performance year, decides not to d
­ istribute
any dividends to the shareholders.
163
 GROUP PERFORMANCE 2019 NOTES

Long-term share-based Shares granted conditional under the plan but not yet allotted (in thousand shares)
incentive p
­ rogram Year of Beginning Cancelled/ Allotments End of Cost 2019
­(equity-settled version) allotment of the year Adjustment forfeited 2019 during 2019 the year (SEK M)1

Year 2015 incentive program 2018/2019 550 – 2 –552 – 3.9

Total 550 – 2 –552 – 3.9

27:1

1 The fair value of the payments is determined based on the share price at the grant date reduced by the discounted value of expected dividends connected with
the share during the vesting period. The cost for the program is recognized over the vesting period. The cost includes social security cost.

The cost for the cash-settled version of the incentive program amounted
to SEK 1 M (3) including social security cost during 2019. During 2019 the
program has been terminated, and therefore there is no liability remaining.
The allotment during the year 2019 pertained to the shares granted
under the program during the year 2015. During 2019, for the equity-­
settled plan a total of 552,069 shares (1,063,270) have been allotted to
participants. For the cash-settled plan, a total of SEK 9 M (23) have been
allotted during 2019.

Average 2019 2018 Board 2019 2018

number members1
of Number of of which Number of of which and other
employees employees women, % employees women, % senior Number at of which Number at of which
executives year-end women, % year-end women, %
AB Volvo
Sweden 325 54 309 51 AB Volvo
Board
Subsidiaries members1 10 40 10 40
Sweden 20,267 22 19,729 22 CEO and
Western other senior
Europe executives 14 29 14 29
(excl.
Sweden) 21,864 17 21,456 17 Volvo
Group
Eastern
Europe 7,103 21 6,860 21 Board
members1 517 25 520 24
North
America 17,880 20 17,053 20 Presidents
and other
South
senior
America 5,865 17 5,371 16
executives 591 26 628 25
Asia 17,724 14 17,510 14
Other 27:3
countries 2,702 18 2,556 17
1 Excluding deputy Board members.
Group total 93,731 18 90,844 18

27:2

164
 GROUP PERFORMANCE 2019 NOTES

Wages, salaries and other 2019 2018

­remunerations Board and of which Other Board and of which Other
SEK M Presidents variable salaries employees Presidents variable salaries employees

AB Volvo1 51.4 21.1 420.0 49.1 22.5 404.3

Subsidiaries 912.3 193.9 47,216.7 838.0 213.2 44,691.1
Group total 963.7 215.0 47,636.7 887.2 235.7 45,095.4

27:4

Wages, salaries and other 2019 2018

remunerations and social costs Wages, salaries Pension Wages, salaries
SEK M remuneration Social costs costs remuneration Social costs Pension costs

AB Volvo2 471.4 143.5 184.7 453.5 134.0 286.4

Subsidiaries 48,129.0 10,416.1 4,846.3 45,529.1 9,547.3 4,048.1
Group total3 48,600.4 10,559.6 5,031.0 45,982.6 9,681.3 4,334.5

27:5
1 Including current and former Board members, Presidents and Executive Vice Presidents.
2 T he parent company’s pension costs, pertaining to Board members and ­P residents are disclosed in note 3 Administrative expenses in the annual report of
the parent company.
3 O f the Volvo Group’s pension costs, SEK 94 M (79) pertain to Board members and Presidents, including current and former Board members, Presidents and
Executive Vice Presidents. The Volvo Group’s outstanding ­pension obligations to these individuals amount to SEK 670 M (659). The cost for non-monetary
benefits in the Volvo Group amounted to SEK 3,336 M (3,175) of which SEK 54 M (43) pertained to Board members and Presidents. The cost for non-mone-
tary ­benefits in the parent company amounted to SEK 11.9 M (12.7) of which SEK 0.6 M (0.3) to Board members and ­P residents.

165
 GROUP PERFORMANCE 2019 NOTES

28 FEES TO THE AUDITORS 29 CASH FLOW

ACCOUNTING POLICY
Fees to the auditors 2019 2018
Cash flow analysis
Deloitte The cash flow statement is prepared in accordance with the indirect method.
– Audit fees 108 94 The cash flow of foreign group companies are translated at average rates.
  whereof to Deloitte AB 29 27 Changes in group structure, acquisitions and divestments are recognized net,
– Audit-related fees 6 5 excluding cash and cash equivalents, and are included in cash flow from
  whereof to Deloitte AB 3 2 investing activities, in the item Acquired and divested operations.
– Tax advisory services 1 2
Read more in Note 18 Cash and cash equivalents.
  whereof to Deloitte AB – 0
– Other fees 4 2
  whereof to Deloitte AB 1 0

PricewaterhouseCoopers Other non-cash items 2019 2018

– Audit fees – 8
  whereof to PricewaterhouseCoopers AB – 1 Allowance for expected credit losses on
accounts ­receivables/customer-financing
– Audit-related fees – 1
receivables 962 722
  whereof to PricewaterhouseCoopers AB – 1
Capital gains/losses on divested
– Tax advisory services – 2 operations1 –1,590 –6
  whereof to PricewaterhouseCoopers AB – – Unrealized exchange rate gains/losses
– Other fees – 1 on accounts r­ eceivables and payables –76 67
  whereof to PricewaterhouseCoopers AB – – Unrealized exchange rate gains/losses
on other operating assets and liabilities 119 367
Total 119 115
Provision for profit sharing program 550 554
Audit fees to others 2 1 Provision for incentive programs 1,860 1,724
Volvo Group Total 121 116 Gains/losses on sale of in-/tangible assets –634 –422
Gains/losses on sale of shares
28:1 and participations2 –222 –824
Income from investments in joint ventures –1,860 –1,131
The audit assignment involves review of the Annual report and financial Anticipated loss in long-term contracts
accounting and the administration by the Board and the President. within defense operation – 102
Audit-related assignments mean quality assurance services required by Service cost related to pensions 1,911 1,655
enactment, articles of association, regulations or agreement. The amount Provision for emission control component3 – 7,000
includes the fee for reviewing the half-year report. Tax services include Deferring of sales with residual value
both tax consultancy and tax compliance services. All other tasks are commitments 4 –3,903 –
defined as other. Other changes 114 –147
Total other non-cash items –2,769 9,661

29:1
1 I n 2019 Volvo Group divested the majority of the shares in WirelessCar with
a capital gain of SEK 1.6 billion.
2 In 2019 Volvo Group divested all shares in Terratech AB with a capital gain of
SEK 199 M.
In 2018 Volvo Group divested shares in Inner Mongolia North Hauler Joint
Stock Co., Ltd (NHL) with a capital gain of SEK 818 M.
 Read more in Note 5 Investments in joint ventures, associated
­companies and other shares and participations, about income/loss from
investments in joint ventures and associated companies.
3 In 2018 a provision of SEK 7.0 billion was made for estimated costs to
address the issue of an emission control component.
Read more in Note 21 Other provisions.
4 A s from 2019, sales with residual value commitments, which is deferred
over the contract period, is adjusted as an other non-cash item.
 Read more in Note 7 Revenue.

166
 GROUP PERFORMANCE 2019 NOTES

Investments and divestments of shares, net 2019 2018 Acquired and divested operations, net 2019 2018

New issue of shares – –2 Acquired subsidiaries and other business units – –200
Capital contribution –102 –1 Divested subsidiaries and other business units 1,343 30
Acquisitions –93 –7 Total cash flow from acquired
Divestments 288 1,018 and divested ­operations, net 1,343 –170
Other –1 –38
29:3
Total cash flow from investments
and divestments of shares, net 92 970
In 2019, Volvo Group divested the majority of the shares in WirelessCar.
29:2 The sale generated a positive cash flow of SEK 1.3 billion.


Read more in Note 3 Acquisitions and divestments of shares in
In 2019 Volvo Group divested all shares in Terratech AB. The sale gener- ­subsidiaries, about the effect on net financial position from the acquisitions
ated a positive cash flow of SEK 250 M. and divestments. 
In 2018 Volvo Group divested shares in Inner Mongolia North Hauler
Joint Stock Co., Ltd (NHL) which generated a positive cash flow of SEK
1.0 billion.

Read more in Note 5 Investments in joint ventures, associated companies

and other shares and participations, about divested shares in Inner Mongo-
lia North Hauler Joint Stock Co., Ltd (NHL).

Changes in loans 2019 Cash flows Non-cash items

Transition
December effect IFRS New Amorti­ Reclass­i ­ Unrealized Currency December 31,
31, 2018 161 borrowings zations fications2 currency effects translation 2019

Current bond loans

and other loans 48,646 1,525 29,967 –61,166 35,174 –706 2,694 56,135
Non–current bond loans
and other loans 87,210 4,684 49,498 –7,871 –35,182 748 2,528 101,616
Interest and currency
risk derivatives –2,966 – – – – 1,639 – –1,328
Realized derivatives – – – 946 – – – –
Other – – –1,9133 –121 – – – –
Cash flow impact from
changes in loans 77,553 –68,212 –7

Changes in loans 2018 Cash flows Non-cash items

December New Amorti­ Reclass­i ­ Unrealized Currency December 31,
31, 2017 borrowings zations fications currency effects translation 2018

Current bond loans

and other loans 53,771 60,340 –98,181 30,834 –739 2,621 48,646
Non-current bond loans
and other loans 73,904 47,367 –6,635 –30,834 649 2,759 87,210
Interest and currency
risk derivatives –2,957 – – – –9 – –2,966
Realized derivatives – – –624 – – – –
Other – – –324 – – – –
Cash flow impact from
changes in loans 107,707 –105,764 –

29:4
1 Read more in Note 31 Changes in Volvo Group Financial Reporting 2019. The opening balance for 2019 is restated due to the implementation of IFRS 16.
2 During 2019, SEK 7 M have been reclassified from current and non-current other loans to liabilities held for sale.
3 During 2019, new lease liabilities of SEK 1.9 billion were adjusted as non-cash items.

Net borrowings increased by SEK 9.3 billion (1.9) mainly as an effect of higher  ead more in Note 22 Liabilities regarding Current loans and
R
business volume in Financial Services. Non-current loans.
Syndications were performed in Financial Services to an amount of  ead more in Board of Directors report about Cash flow statement
R
and Financial position.
SEK 11.4 billion (7.5). All syndications impacted cash flow this year.
167
 GROUP PERFORMANCE 2019 NOTES

30 FINANCIAL INSTRUMENTS

Financial assets and liabilities measured at fair value

ACCOUNTING POLICY
Purchases and sales of financial assets and liabilities are recognized on
the transaction date. Transaction expenses are included in the assets’ fair
value, except in cases in which the change in value is recognized in the
income statement. The transaction costs that arise in conjunction with
the admission of financial liabilities are amortized over the term of the loan
as financial cost.
A financial asset is derecognized from the balance sheet at maturity
and when all ­significant risks and benefits related to the asset have been
transferred to a third party.
The fair value of financial assets is determined based on valid market
prices, when available. If market prices are unavailable, the fair value is
determined for each asset through the use of various measurement tech-
niques.
Financial instruments are classified based on the degree that market
values have been utilized when measuring fair value. The majority of finan-
cial instruments measured at fair value held by Volvo Group are classified
as level 2. The valuation of level 2 instruments is based on market condi-
tions using quoted market data existing at each balance sheet date. The
basis for the interest is the zero-coupon-curve in each currency which is
used to calculate the present value of all the estimated future cash flows.
For forward exchange contracts the basis is the forward premium based
on current spot rate for each currency and future date. The fair value is
then discounted based on the forward rates as per the balance sheet date.
Shares and participations are classified as level 1 for listed shares and
level 3 for non-listed shares. Call options are classified as level 3 and are
based on the Black & Scholes option pricing formula.
through the income statement
Volvo Group’s financial assets and liabilities held for trading are recog-
nized at fair value through the income statement. As p ­ resented in table
30:1, these instruments are derivatives, used for hedging interest and
currency risks and marketable securities, further presented in note 18
Cash and cash equivalents.
Derivatives used for hedging interest rate exposure in the customer-
financing portfolio within Financial Services as well as the debt portfolio
in Industrial Operations are included in this section. Unrealized gains and
losses from fluctuations in the fair value of the financial instruments are
recognized in other financial income and expenses. The Volvo Group
intends to hold these derivatives to maturity, which is why, over time, the
market valuation will be offset by the interest-rate fixing on borrowing and
lending in Financial Services, and thus not affect net income or cash flow.
Financial instruments used for hedging currency risks arising from
future firm commercial cash flows are also recognized in this section.
Realized result and unrealized revaluation of derivatives are recognized in
other financial income and expenses to be able to net all internal flows
before entering into external derivatives to hedge future currency risk.
When hedging future cash flows for specific orders the classification in
the income statement is decided on a case by case basis. In 2019, gains
and losses from derivatives hedging currency risks for specific orders of
SEK –35 M (–6) have been recognized in operating income and SEK –54
M (–42) in other financial income and expenses.
Read more in Note 9 Other financial income and expenses.
Hedge Accounting is not applied by the Volvo Group.

Financial assets measured at amortized cost

Customer-financing receivables are held as part of a business model Information regarding carrying amounts and fair values
whose objective is of collecting contractual cash flows. The contractual In table 30:1, carrying amounts are compared with fair values for all of
cash flows are solely payments of principal and interest and are valued at the Volvo Group’s financial instruments.
amortized cost in accordance with the effective interest method. In this
category the Volvo Group also includes accounts receivables and holding
of shares in non-listed companies for which a fair value cannot reasonably
be determined. The carrying value for financial assets measured at amor-
tized cost is a reasonable approximation of the fair value. The carrying
value has been analyzed and compared with an estimated fair value and is
a reasonable approximation of the fair value.

Read more in Note 5 Investments in joint ventures, associated companies

and other shares and participations.
Read more in Note 15 Customer-financing receivables.
Read more in Note 16 Receivables.

Financial assets measured at fair value through other

comprehensive income
In this category the Volvo Group includes holding of shares in listed compa-
nies as the shares are not held for trading. Changes in fair value is measured
through other comprehensive income and amounted to SEK 48 M (34).

Read more in Note 5 Investments in joint ventures, associated companies

and other shares and participations.

168
 GROUP PERFORMANCE 2019 NOTES

Carrying amounts and fair values on financial instruments Dec 31, 2019 Dec 31, 2018
SEK M Carrying Fair Carrying Fair
value value value value

Assets
Financial assets measured at fair value through the income statement1
Interest and currency risk derivatives2 Note 16 2,015 2,015 3,807 3,807
Other derivatives3 564 564 564 564
B/S   Marketable securities Note 18 200 200 160 160
2,779 2,779 4,532 4,532

Financial assets measured at fair value through other comprehensive income

Holding of shares in listed companies1 Note 5 – – 496 496

Financial assets measured at amortized cost

B/S   Accounts receivables Note 16 37,723 37,723 41,906 41,906
Customer-financing receivables Note 15 147,127 147,127 126,927 126,927
Holding of shares in non-listed ­companies1 Note 5 158 158 244 244
Other interest-bearing receivables Note 16 1,504 1,504 540 540
186,512 186,512 169,618 169,618

B/S   Cash and cash equivalents Note 18 61,461 61,461 46,933 46,933

Liabilities Note 22
Financial liabilities measured at fair value through the income statement
Interest and currency risk derivatives1,4 2,468 2,468 1,513 1,513

Financial liabilities measured at ­amortized cost5

Non-current bond loans and other loans 100,096 101,737 86,438 87,580
Current bond loans and other loans 55,768 55,822 48,239 48,295
B/S   Trade Payables 66,866 66,866 73,630 73,630
222,730 224,425 208,307 209,505

30:1

1 All derivatives and marketable securities are classified as level 2, shares in
listed companies are classified as level 1 and shares in non-listed companies
are classified as level 3. A reclassification has been made during 2019 to
assets held for sale by SEK 544 M, related to shares in listed companies.
2 T he Volvo Group’s gross exposure from derivatives reported as assets is
reduced by 89% (79) by netting agreements and cash deposits to SEK
230 M (788).
3 T he input data used in the valuation model for calculating the fair value has
not changed during 2019.
4 The Volvo Group’s derivatives reported as liabilities is reduced by 88% (97)
by netting agreements and cash deposits to SEK 285 M (50).
5 In the Volvo Group balance sheet, financial liabilities include loan-related
derivatives amounting to SEK –1,888 M (–1,180). The credit risk is included
in the fair value of loans.

Read more in Note 4 Goals and policies in financial risk management.

169
 GROUP PERFORMANCE 2019 NOTES

Derecognition of financial assets
The Volvo Group is involved in discounting activities to reduce financial risks.
An evaluation is performed to establish whether substantially all the risks
and rewards have been transferred to an external party when entering into
an agreement. The Volvo Group’s intention is not to be involved in dis-
counting activities if not substantially all the risks and rewards can be
transferred to an external party. As of December 31, 2019 there were no
transferred financial assets in the Volvo Group that did not fullfill the
requirements for derecognition.
Financial assets for which substantially all risks and rewards have been
transferred are derecognized from the Volvo Group’s balance sheet.
Involvement in these assets is reflected in the Volvo Group’s ­balance sheet
as part of the external credit guarantees. They are recognized at fair value
as provisions in the balance sheet and amounted to SEK 0.1 bn (0.1).
The Volvo Group’s maximum loss exposure is considered being the total
recourse relating to transferred assets that are part of the recognized credit
guarantees, i.e. the total amount the Volvo Group would have to pay in case
of default of the customers. The likelihood for all customers going into default
at the same time is considered to be low. The gross exposure for the Volvo
Group amounted to SEK 2.9 bn (2.4) related to credit guarantees issued for
customers and others and is part of the Volvo Group’s contingent liabilities.
This amount has not been reduced by the value of counter guarantees
received or other collateral such as the right to repossess products.
Read more in Note 21 Other provisions.
Read more in Note 24 Contingent Liabilities.
Gains, losses, interest income and interest expenses from
financial instruments
Table 30:3  shows how gains and losses, as well as interest income and
interest expenses have affected income after financial items in the Volvo
Group divided by the different categories of financial instruments.

In the table below outstanding derivatives hedging currency and interest rate risks is presented.

Outstanding derivative instruments Dec 31, 2019 Dec 31, 2018

SEK M Nominal amount Carrying value Nominal amount Carrying value

Interest-rate swaps
– receivable position 87,221 948 120,824 3,350
– payable position 194,399 –2,329 139,351 –1,218
Forward and futures
– receivable position – – – –
– payable position 669 –19 – –
Foreign exchange derivatives
– receivable position 27,589 1,061 27,066 457
– payable position 16,695 –118 23,871 –296
Options purchased
– receivable position 428 5 286 0
– payable position – – 307 –
Options written
– receivable position – – – –
– payable position 405 –2 307 0
Total –453 2,294

30:2

170
 GROUP PERFORMANCE 2019 NOTES

Recognized in operating income 2019 2018

Gain/ Interest Interest Gain/ Interest Interest
SEK M Loss income expense Loss income expense

Financial assets and liabilities at fair value through the income statement
Currency risk derivatives1, 2 –35 – – –6 – –
Financial assets measured at amortized cost
Accounts receivables/trade payables3 –502 – – –737 – –
Customer-financing receivables 4 423 7,765 – 234 6,295 –
Shares and participations in listed companies5 18 – – 17 – –
Shares and participations in non-listed companies5 267 – – 16 – –
Financial liabilities measured at amortized cost6 – – -3,424 – – –2,508
Impact on operating income 171 7,765 3,424 –476 6,295 –2,508

Recognized in net financial items7,8 2019 2018

Gain/ Interest Interest Gain/ Interest Interest
SEK M Loss income expense Loss income expense

Financial assets and liabilities at fair value through the income statement
Marketable securities 17 4 – 20 3 –
Interest and currency rate risk d
­ erivatives1, 2 –3,848 11 –1,483 –1,495 –14 –1,058
Financial assets measured at amortized cost
Cash and Cash equivalents – 306 – – 210 –
Financial liabilities measured at amortized cost 2,853 – 189 765 – –242
Impact on net financial items7,8 –978 321 –1,294 –710 199 –1,300

30:3

1 Accrued and realized interest related to financial assets and liabilities meas-
ured at fair value through the income statement is included in the amounts
for gains and losses.
2 T he Volvo Group uses forward contracts and currency options to hedge the
value of future cash flows in foreign currency. Both unrealized and realized
result of currency risk contracts is included in the table.
3 Information regarding changes in allowance for expected credit losses on
accounts receivables is provided in note 16 Receivables and note 8 Other
operating income and expenses.
4 T he amount includes gains/losses due to derecognition of assets where
SEK 333 M (151) is related to the sale of customer-financing receivables
and SEK 90 M (83) is related to early buy-out revenue. Information regard-
ing changes in allowance for expected credit losses on customer-financing
receivables is provided in note 15 Customer-financing receivables and note 8
Other ­operating income and expenses.
5 Changes in fair value on shares and participations in listed companies
through other comprehensive income amounted to SEK 48 (34).
6 Interest expenses attributable to financial liabilities measured at amortized
cost recognized in operating income include interest expenses for financing
­operating lease activities, which are not classified as financial instruments.
7 In gain/loss, interest income and expenses related to financial instruments
recognized in net financial items, SEK –978 M (–710) was recognized in
other financial income and expenses.
8 Interest expenses attributable to pensions reported in net financial items of,
SEK 379 M (358) are not included in this table.
Read more in Note 4 Goals and policies in financial risk management.
 ead more in Note 5 Investments in joint ventures, associated ­companies
R
and other shares and participations.
Read more in Note 9 Other financial income and expenses.

171
 GROUP PERFORMANCE 2019 NOTES

31 CHANGES IN VOLVO GROUP FINANCIAL REPORTING 2019

Implementation of new accounting standards therefore not included in the lease liability and right-of-use asset. For leases
As from January 1, 2019 the Volvo Group applies IFRS 16 Leases and previously classified as finance leases with the Volvo Group as the lessee,
IFRIC 23 Uncertainty over Income Tax Treatments. a lease liability was recognized at the previous carrying amount of the
finance lease liability amounting to SEK 960 M. A right-of-use asset was
IFRS 16 Leases measured as the previous carrying amount of the finance lease asset
IFRS 16 Leases replaced IAS 17 Leases and the related interpretations amounting to SEK 1,047 M.
IFRIC 4, SIC-15 and SIC-27. The standard represents a new framework for The new lessee accounting model resulted in an increase of right-of-use
recognizing leases with additional disclosure requirements. assets by SEK 6,209 M and an increase of lease liabilities by SEK 6,209 M
IFRS 16 does not imply any significant changes to lessor accounting. as of January 1, 2019. All right-of-use assets are recognized within
Hence, the main impact of implementing the new standard is related to tangible assets and all lease liabilities are recognized as current- and
lessee accounting, as lease contracts are recognized in the ­balance sheet. non-current within other loans.
The accounting model reflects that the lessee obtains the right to use an
Read more in Note 14 Leasing about accounting policy for 2019.
asset for a period of time and has an obligation to pay for that right. For the
Volvo Group this implies a change in accounting of lease contracts for real
The effect from the transition to IFRS 16 is presented on page 173–174 in
estate, company cars and other leased items.
the restated balance sheet and net financial position as of January 1, 2019.
Implementing the new lease accounting for lessees results in increased
assets and interest-bearing liabilities in the balance sheet, thereby affecting
IFRIC 23 Uncertainty over income tax treatment
the net financial position. It also has a positive impact on operating income
IFRIC 23 is a new interpretation of uncertain income tax treatments
compared to prior years as a part of the lease expenses is recognized as
within the scope of IAS 12 Income Taxes. An assessment shall be made
interest expense within the finance net. In the cash flow statement the lease
whether it is probable that the tax authority or court will accept the tax
payments are allocated between interests paid in the operating cash flow
treatment in the income tax return, otherwise, the effect of uncertainty
and amortization of lease liabilities within the financing activities. Thus, it has
should be estimated and recognized in the financial statements as tax
a positive effect on the operating cash flow compared to prior years.
liability.
IFRS 16 is applied retrospectively but prior period reported financial
For the Volvo Group, the implementation of IFRIC 23 implies a changed
information has not been restated. Hence, the opening balance for 2019
classification for identified income tax-related risks that were previously
was adjusted in accordance with the new standard. For leases p ­ reviously
recognized as a provision for tax charges that are probable to regulate the
classified as operating leases with the Volvo Group as the l­essee, a lease
obligation. Uncertain income tax treatments are now reported as tax lia-
liability was recognized at the present value of future lease payments. A
bilities.
right-of-use asset was recognized at an amount equal to the lease liability;
IFRIC 23 is applied retrospectively but prior period reported financial
hence no transition effect was presented in equity.
information has not been restated. Hence, the opening balance for 2019
On transition to IFRS 16 there are some exceptions from the lessee
was adjusted in accordance with the new interpretation. Income tax risks
accounting model that the Volvo Group applied. Previous assessments of
previously recognized as current and non-current provisions were reclas-
the lease definition remain on contracts entered into before January 1,
sified to tax liabilities with an amount of SEK 295 M as of January 1, 2019.
2019. At the transition, IFRS 16 was therefore only applied to the contracts
Thus IFRIC 23 had no impact on equity.
that were identified as leases in accordance with IAS 17 and IFRIC 4. The
IFRS 16 definition of a lease is applied on contracts entered on January 1, Read more in Note 10 Income taxes about accounting policy for 2019.
2019 or after, to assess whether a contract contains a leased asset. If a
contract includes a low value asset or has a short remaining lease term, i.e. The effect from the transition to IFRIC 23 is presented on page 173 in
ends during 2019, or is classified as a service contract, the lease payments the restated balance sheet as of January 1, 2019.
are recognized as operating expenses in the income statement and are

172
 GROUP PERFORMANCE 2019 NOTES

CONSOLIDATED BALANCE SHEET

Volvo Group
Previously reported Restatement Restatement After restatement
SEK M Dec 31, 2018 IFRS 16 IFRIC 23 Jan 1, 2019

Assets
Non-current assets
Intangible assets 38,104 – – 38,104
Tangible assets
Property, plant and equipment 55,673 6,209 – 61,882
Assets under operating leases 43,103 – – 43,103
Financial assets
Investments in Joint Ventures and associated companies 11,135 – – 11,135
Other shares and participations 740 – – 740
Non-current customer-financing receivables 66,148 – – 66,148
Net pension assets 1,549 – – 1,549
Non-current interest-bearing receivables 1,296 – – 1,296
Other non-current receivables 8,736 – – 8,736
Deferred tax assets 13,505 – – 13,505
Total non-current assets 239,989 6,209 – 246,198

Current assets
Inventories 65,783 – – 65,783
Current receivables
Customer-financing receivables 60,779 – – 60,779
Tax assets 1,669 – – 1,669
Interest-bearing receivables 2,097 – – 2,097
Accounts receivable 41,906 – – 41,906
Other receivables 15,144 – – 15,144
Assets held for sale 203 – – 203
Marketable securities 160 – – 160
Cash and cash equivalents 46,933 – – 46,933
Total current assets 234,675 – – 234,675
Total assets 474,663 6,209 – 480,872

Equity and liabilities

Equity attributable to owners of AB Volvo 123,379 – – 123,379
Non-controlling interest 2,452 – – 2,452
Total equity 125,831 – – 125,831

Non-current provisions
Provisions for post-employment benefits 16,482 – – 16,482
Provisions for deferred taxes 4,128 – – 4,128
Other provisions 14,590 – –120 14,470
Non-current liabilities
Bond loans 59,115 – – 59,115
Other loans 28,095 4,684 – 32,779
Other liabilities 32,949 – – 32,949
Current provisions 13,448 – –175 13,273
Current liabilities
Bond loans 26,657 – – 26,657
Other loans 21,989 1,525 – 23,514
Trade payables 73,630 – – 73,630
Tax liabilities 3,749 – 295 4,044
Other liabilities 53,999 – – 53,999
Total equity and liabilities 474,663 6,209 – 480,872

31:1

173
 GROUP PERFORMANCE 2019 NOTES

CONSOLIDATED NET FINANCIAL POSITION

Volvo Group
Previously reported Restatement After restatement
SEK bn Dec 31, 2018 IFRS 16 Jan 1, 2019

Non-current interest-bearing assets

Non-current customer-financing receivables 66.1 – 66.1
Non-current interest-bearing receivables 1.3 – 1.3
Current interest-bearing assets
Customer-financing receivables 60.8 – 60.8
Interest-bearing receivables 2.1 – 2.1
Marketable securities 0.2 – 0.2
Cash and cash equivalents 46.9 – 46.9
Total interest-bearing financial assets 177.4 – 177.4

Non-current interest-bearing liabilities

Bond loans –59.1 – –59.1
Other loans –28.1 –4.7 –32.8
Current interest-bearing liabilities
Bond loans –26.7 – –26.7
Other loans –22.0 –1.5 –23.5
Total interest-bearing financial liabilities –135.9 –6.2 –142.1
Net financial position excl. post-employment benefits 41.6 –6.2 35.4

Provisions for post-employment benefits, net –14.9 – –14.9

Net financial position incl. post-employment benefits 26.6 –6.2 20.4

31:2

174
GROUP PERFORMANCE 2019 NOTES

PARENT
COMPANY

175
 GROUP PERFORMANCE 2019 PARENT COMPANY

PARENT COMPANY AB VOLVO

Corporate registration number 556012-5790.
Amounts within parentheses refer to the preceding year, 2018.

Board of Directors’ report
AB Volvo is the parent company of the Volvo Group and its operations com-
prise of the Volvo Group’s head office with staff together with some cor­
porate functions.
Income from investments in Volvo Group companies include dividends
amounting to SEK 7,509 M (2,646) as well as transfer price adjustments
and royalties amounting to a net income of SEK 122 M (166).
The carrying value of shares and participations in Volvo Group companies
amounted to SEK 72,272 M (72,765), of which SEK 71,084 M (71,706)
pertained to shares in wholly owned subsidiaries. The corresponding share-
holders’ equity in the subsidiaries (including equity in untaxed reserves
but excluding non-controlling interests) amounted to SEK 139,883 M
(129,867).
Total investments in joint ventures and associated companies, recog-
nized in accordance with the equity method in the consolidated accounts,
amounted to SEK 8,989 M (8,889). The portion equity in joint ventures
and associated companies pertaining to AB Volvo amounted to SEK
10,400 M (7,505).
Financial net debt amounted to SEK 32,160 M (27,785).
AB Volvo’s risk capital (equity plus untaxed reserves) amounted to SEK
73,220 M (67,545) corresponding to 60% (58%) of total assets.

I N C O M E S TAT E M E N T
SEK M 2019 2018

Net sales Note 2 362 635

Cost of sales Note 2 –362 –635
Gross income 0 0

Administrative expenses Note 2, 3 –1,454 –1,601

Other operating income and expenses Note 4 –52 –23
Income from investments in Group companies Note 5 6,289 4,899
Income from investments in joint ventures and associated companies Note 6 451 388
Income from other investments Note 7 0 –4
Operating income 5,234 3,659

Interest income and similar credits 1 0

Interest expenses and similar charges Note 8 –834 –730
Other financial income and expenses Note 9 –22 –21
Income after financial items 4,379 2,908

Appropriations Note 10 21,792 14,440

Income taxes Note 11 –4,162 –2,727
Income for the period 22,009 14,621

OT HER COMPREHENSIVE INCOME

Income for the period 22,009 14,621
Other comprehensive income, net of income taxes – –
Total comprehensive income for the period 22,009 14,621

176
 GROUP PERFORMANCE 2019 PARENT COMPANY

BAL ANCE SHEE T

SEK M Dec 31, 2019 Dec 31, 2018

Assets
Non-current assets
Tangible assets Note 12 7 7
Financial assets
Shares and participations in Group companies Note 13 72,272 72,765
Investments in joint ventures and associated companies  Note 13 8,997 8,894
Other shares and participations Note 13 1 4
Deferred tax assets Note 11 207 186
Total non-current assets 81,484 81,856

Current assets
Current receivables
Receivables Group companies 39,191 35,027
Other receivables Note 14 360 118
Total current assets 39,551 35,145
Total assets 121,035 117,001

Equity and liabilities

Equity
Restricted equity
Share capital 2,554 2,554
Statutory reserve 7,337 7,337

Unrestricted equity
Non-restricted reserves 390 378
Retained earnings 30,929 36,654
Income for the period 22,009 14,621
Total equity 63,219 61,544

Untaxed reserves Note 15 10,000 6,001

Provisions
Provisions for post-employment benefits Note 16 248 258
Total provisions 248 258

Non-current liabilities Note 17

Liabilities to Group companies 5,589 13,973
Other liabilities 6 4
Total non-current liabilities 5,595 13,977

Current liabilities
Trade payables 226 210
Other liabilities to Group companies 39,246 34,050
Tax liabilities 1,722 414
Other liabilities Note 18 779 547
Total current liabilities 41,973 35,221
Total equity and liabilities 121,035 117,001

177
 GROUP PERFORMANCE 2019 PARENT COMPANY

C A S H F L O W S TAT E M E N T
SEK M 2019 2018

Operating activities
Operating income 5,234 3,659
Depreciation and amortization 0 0
Other non-cash items Note 20 176 –3,995
Total change in working capital whereof –726 –99
Change in accounts receivable –70 –14
Change in trade payables 48 19
Other changes in working capital –704 –104
Interest and similar items received 1 0
Interest and similar items paid –829 –727
Other financial items –13 –14
Group contributions received 14,440 17,923
Income taxes paid –2,218 –2,751
Cash-flow from operating activities 16,065 13,996

Investing activities
Investments in in-/tangible assets   0 –
Disposals of in-/tangible assets –17 –
Investments and divestments of shares in group companies, net Note 20 –19 371
Investments and divestments of shares in non-group companies, net Note 20 –101 –1
Cash-flow after net investments   15,928 14,366

Financing activities
Change in loans, net Note 20 4,377 –5,790
Dividends to AB Volvo shareholders   –20,335 –8,636
Other 30 60
Change in cash & cash equivalents 0 0

Cash & cash equivalents, beginning of year – –

Cash & cash equivalents, end of year – –

178
 GROUP PERFORMANCE 2019 PARENT COMPANY

C H A N G E S I N EQ U I T Y
Restricted equity Unrestricted equity
Statutory Share premium Retained Total
SEK M Share capital reserve reserve earnings Total equity

Balance at December 31, 2017 2,554 7,337 338 45,305 45,643 55,534

Income for the period – – – 14,621 14,621 14,621

Other comprehensive income

Other comprehensive income for the period – – – – – –

Total income for the period – – – 14,621 14,621 14,621

Transactions with shareholders

Dividends to AB Volvo shareholders – – – –8,636 –8,636 –8,636
Share based payments – – 40 –15 25 25
Transactions with shareholders – – 40 –8,651 –8,611 –8,611

Balance at December 31, 2018 2,554 7,337 378 51,275 51,653 61,544

Income for the period – – – 22,009 22,009 22,009

Other comprehensive income

Other comprehensive income for the period

Total income for the period – – – 22,009 22,009 22,009

Transactions with shareholders

Dividends to AB Volvo shareholders – – – –20,335 –20,335 –20,335
Share based payments – – 12 –11 1 1
Transactions with shareholders – – 12 –20,346 –20,334 –20,334

Balance at December 31, 2019 2,554 7,337 390 52,938 53,328 63,219

Read more in Note 19 Equity and number of shares in the consolidated financial statements about the share capital of the parent company.

179
 GROUP PERFORMANCE 2019 PARENT COMPANY NOTES

NOTES TO FINANCIAL STATEMENTS

The amounts within ­parentheses refer to the preceding year, 2018.

1 ACCOUNTING POLICIES 2 REVENUE AND INTRA-GROUP

­T RANSACTIONS

The parent company has prepared its financial statements in accordance
with the Swedish Annual Accounts Act (1995:1554) and RFR 2, Accounting
for legal entities. According to RFR 2, the parent company shall apply all the
International Financial Reporting Standards endorsed by the EU as far as this
is possible within the framework of the Swedish Annual Accounts Act.
The changes in RFR 2 applicable to the fiscal year beginning January 1,
2019, concerns IFRIC 23 Uncertainty over income tax treatment and
IFRS 16 Leases.
The recognized net sales of SEK 362 M (635) pertain mainly to revenues
from sale of services to group companies SEK 320 M (590). Revenue is
recognized when the control of the service has been transferred to the
customer, which is when the parent company incurs the associated cost to
deliver the service and the customer can benefit from the use of the deliv-
ered services.
Purchases from group companies amounted to SEK 468 M (488).

3
IFRIC 23 Uncertainty over income tax treatment was effective as from
January 1, 2019. IFRIC 23 clarifies how the recognition and measurement
requirements of IAS 12 Income taxes are applied where there is uncer- ADMINISTRATIVE EXPENSES
tainty over income tax treatments. The implementation of IFRIC 23 has not
had any major impact on the parent company. Depreciation
IFRS 16 Leases was effective as of January 1, 2019. RFR 2 includes an Administrative expenses include depreciation of SEK 0 M (0) and pertains
exception allowing all lease contracts to be accounted for as operational to machinery and equipment.
lease contracts when the parent company is a lessee. The changes in
IFRS 16 compared to IAS 17 Leases has not had any major impact on the
parent company.
There are no announced changes in RFR 2 applicable to the fiscal year Fees to the auditors 2019 2018
beginning January 1, 2020 or later. Deloitte AB
The accounting policies applied by the Volvo Group are described in the - Audit fees 18 18
respective notes in the consolidated financial statements. The main devi-
-Audit-related fees 1 –
ations between the accounting policies applied by the Volvo Group and
- Other fees 1 0
the parent company are described below.
PricewaterhouseCoopers AB
Shares and participations in group companies and investments in joint
– Audit-related fees – 3
ventures and associated companies are recognized at cost in the parent
company and test for impairment is performed annually. In accordance – Other fees 0 –
with RFR 2, the parent company includes costs related to acquisition of a Total 20 21
business in the acquisition value. Dividend is recognized in the income
3:1
statement. All shares and participations are related to business opera-
tions and profit or loss are recognized within operating income.  ead more in Note 28 Fees to the Auditors in the consolidated financial
R
The parent company applies the exception in the application of IFRS 9 statements for a description of the different categories of fees.
which concerns accounting and measurement of financial contracts of guar-
antee in favour of subsidiaries and associated companies. The parent com- Personnel
pany recognizes the financial contracts of guarantee as contingent liabilities. Wages, salaries and other remunerations amounted to SEK 471 M (453),
According to RFR 2, application of the regulations in IAS 19 regarding social costs to SEK 143 M (134) and pension costs to SEK 193 M (302).
defined benefit plans is not mandatory for legal entities. However, IAS 19 Pension cost of SEK 9 M (8) pertained to Board Members and the Presi-
shall be applied for supplementary disclosures when applicable. RFR 2 dent. The parent company has outstanding pension obligations of SEK
refers to the Swedish law on safeguarding of pension commitments 1 M (1) to these individuals.
(“tryggandelagen”) related to recognition of provisions for post-employment The number of employees at year end was 331 (329).
benefits in the balance sheet and of plan assets in pension foundations.  ead more in Note 27 Personnel in the consolidated financial statements
R
The parent company recognizes the difference between depreciation about the average number of employees, wages, salaries and other remuner-
according to plan and tax depreciation as accumulated additional depreci- ations including incentive program as well as Board members and senior
ation, included in untaxed reserves. ­executives by gender.
Reporting of group contributions is recognized in accordance with the
alternative rule in RFR 2. Group contributions are reported as appropria-
tions.

180
 GROUP PERFORMANCE 2019 PARENT COMPANY NOTES

4 OTHER OPERATING INCOME

AND EXPENSES
Other operating income and expenses include loss on sale of rights by SEK 51
M, donations, grants and Volvo profit sharing program costs by SEK 4 M (5).
6 INCOME FROM INVESTMENTS IN JOINT
VENTURES AND ASSOCIATED COMPANIES
Income from investments in joint ventures and associated companies
include dividend from Dongfeng Commercial Vehicles Co., Ltd by SEK
392 M (336) and from VE Commercial Vehicles, Ltd. by SEK 59 M (53).

5 INCOME FROM INVESTMENTS

IN GROUP COMPANIES
7 INCOME FROM OTHER INVESTMENTS

AB Volvo have not had any transactions which have had a significant impact
Income from investments in on the financial statements.
Group Companies 2019 2018

8
Dividends received
Volvo Holding Sverige AB, Sweden 4,980 675 INTEREST EXPENSES AND SIMILAR
VNA Holding Inc., USA 1,423 957 CHARGES
JSC Volvo Vostok, Russia 316 –
Volvo Automotive Finance (China) Ltd, China 180 – Interest expenses and similar charges totalling SEK 834 M (730) included
Volvo Group UK Ltd., Great Britain 175 41 ­interest of SEK 834 M (730) to subsidiaries.
Volvo China Investment Co., China 137 –

9
Volvo Malaysia Sdn Bhd, Malaysia 106 227
Volvo Danmark A/S, Denmark 100 83 OTHER FINANCIAL
Volvo Norge AS, Norway 92 33 INCOME AND EXPENSES
Kommersiella Fordon Europa AB, Sweden – 630
Subtotal 7,509 2,646 Other financial income and expenses include exchange rate gains and
losses, costs for credit rating and stock exchange listing cost.
Impairment of shares

10
Volvo Construction Equipment AB, Sweden –2,554 –
Volvo Korea Holding AB, Sweden –300 –
Volvo Italia Spa, Italy –170 –
APPROPRIATIONS
Subtotal –3,024 –
Reversal impairment of shares Appropriations include a net of group contributions of SEK 25,792 M
Volvo Bussar AB, Sweden 1,054 – (14,440), tax allocation reserve of 4,000 (–) and reversal of additional
Volvo Information Technology AB, Sweden 145 – depreciation of SEK 0 M (0).
JSC Volvo Vostok, Russia 143 –
Volvo Group UK, Ltd., Great Britain 134 –
Volvo Business Services AB, Sweden 118 –
Volvo Logistics AB, Sweden 85 –
VFS Servizi Financiari Spa, Italy 22 –
Kommersiella Fordon AB, Sweden – 802
Volvo Financial Services AB, Sweden – 722
Volvo Italia Spa, Italy – 282
AB Volvo Penta, Sweden – 148
Volvo China Investment Co Ltd., China – 99
Volvo Norge AS, Norway – 8
Subtotal 1,701 2,061
Income from divestment of shares
Alviva AB, Sweden –21 –
Volvo Event Management SA, Belgium 2 –
Volvo East Asia (Pte) Ltd., Singapore – 26
Subtotal –19 26
Income from investments in Group Companies 6,167 4,733

5:1

Transfer price adjustments and royalties amount to a net income of SEK

122 M (166).
181
 GROUP PERFORMANCE 2019 PARENT COMPANY NOTES

11 INCOME TAXES

Income taxes were distributed as follow:

2019 2018

2019 2018 Income before taxes 26,171 17,348

Income tax according to applicable tax rate –5,601 –3,817
Current taxes relating to the period –4,217 –2,725 Capital gains/losses –4 6
Adjustment of current taxes for prior period 34 7 Non-taxable dividends 1,703 668
Deferred taxes 21 –9 Tax effect due to changed income tax rate 1 –15
I/S   Total income taxes –4,162 –2,727 Non-taxable revaluations of shareholdings 16 –
Other non-deductible expenses –656 –21
11:1 Other non-taxable income 349 456
Adjustment of current taxes for prior period 34 7
Deferred taxes relate to estimated tax on temporary differences.
Withholding tax –9 –6
Deferred taxes has been revaluated based on the tax rate that are
expected for the period when the asset is realized or the liability are Remeasurement of deferred tax assets –2 0
adjusted. The table below discloses the principal reasons for the differ- Current tax on standardized method 7 –5
ence between the corporate income tax of 21.4% and the tax for the Income taxes for the period –4,162 –2,727
period:
11:2

Specification of deferred tax Dec 31, Dec 31,

assets 2019 2018
Provisions for post-employment benefits 207 186
B/S   Deferred tax assets 207 186

11:3

182
 GROUP PERFORMANCE 2019 PARENT COMPANY NOTES

12 INTANGIBLE AND TANGIBLE ASSETS

Intangible assets, acquisition costs Rights Other intangible assets Total intangible assets

Opening balance 2018 52 116 168

Acquisition cost as of December 31, 2018 52 116 168

Sales –52 – –52

Acquisition cost as of December 31, 2019 – 116 116

Intangible assets, accumulated amortization Rights Other intangible assets Total intangible assets

Opening balance 2018 52 116 168

Accumulated amortization as of December 31, 2018 52 116 168

Sales –52 – –52

Accumulated amortization as of December 31, 2019 – 116 116
B/S   Net value in balance sheet as of December 31, 20181 – – –
B/S   Net value in balance sheet as of December 31, 20191 – – –

Tangible assets, acquisition costs Machinery and equipment Total tangible assets 

Opening balance 2018 21 21

Acquisition cost as of December 31, 2018 21 21

Sales/scrapping –4 –4
Acquisition cost as of December 31, 2019 17 17

Tangible assets, accumulated depreciation Machinery and equipment Total tangible assets 

Opening balance 2018 13 13

Accumulated depreciation as of December 31, 2018 13 13

Depreciation 0 0
Sales/scrapping –3 –3
Accumulated depreciation as of December 31, 2019 10 10
B/S   Net value in balance sheet as of December 31, 20181 7 7
B/S   Net value in balance sheet as of December 31, 20191 7 7

1 Acquisition value, less accumulated depreciation, amortization and impairment.

12:1

13 INVESTMENTS IN SHARES AND PARTICIPATIONS

AB Volvo owns, directly or indirectly, 276 (275) legal entities. The legal
structure is designed to effectively manage legal requirements, adminis-
tration and taxes, as well as the operations conducted by the Volvo Group
in each country it operates. Legal entities may have different characters
and include different types of operations, such as production, develop-
ment and sales. The character of a legal entity may change over time.
Furthermore legal entities could include different type of the Volvo
Group’s operations and this could also change over time. In some coun-
tries there are legal restrictions which limit the Volvo Group’s ability to
transfer assets between the Volvo Group’s legal entities. Read more in
Note 18 Cash & cash equivalents in the consolidated financial statements
for a description of restrictions related to cash and cash equivalents.
Volvo Group’s operational structure gives a better overview of how the
Volvo Group has chosen to organize its business. Read more about Volvo
Group’s operational structure in Note 6 Segment Reporting in the consoli­
dated financial statements.

183
 GROUP PERFORMANCE 2019 PARENT COMPANY NOTES

Changes in AB Volvo’s holding of shares and participations are disclosed below:

 Joint ventures
Group and associated Other shares and
companies companies participations
2019 2018 2019 2018 2019 2018
Opening balance 72,765 69,244 8,894 8,895 4 7
Acquisitions/New issue of shares 830 – – – – –
Divestments/Redemption of shares –32 –3,427 – – – –1
Shareholder’s contribution 32 4,887 100 – 1 1
Impairment of shares and participations –3.024 – – –1 –1 –3
Reversal impairment of shares and ­participations 1,701 2,061 – – – –
Reclassification – – 3 – –3 –
B/S   Balance sheet, December 31 72,272 72,765 8,997 8,894 1 4

Holding of shares in Group ­companies   Dec 31, 2019 Dec 31, 2019 Dec 31, 2018
Registration Percentage Carrying Carrying
number holding1 value2 value2
Volvo Lastvagnar AB, Sweden 556013-9700 100 8,711 8,711
Volvo Holding Sverige AB, Sweden 556539-9853 100 8,134 8,134
UD Trucks Corporation, Japan –  100 8,928 8,928
Volvo Bussar AB, Sweden 556197-3826 100 3,033 1,980
Volvo Construction Equipment AB, Sweden 556021-9338 100 7,559 10,113
AB Volvo Penta, Sweden 556034-1330 100 586 586
VNA Holding Inc., USA –  100 3,688 3,688
Volvo Financial Services AB, Sweden 556000-5406 100 2,667 2,667
Volvo Treasury AB, Sweden 556135-4449 100 13,044 13,044
Sotrof AB, Sweden 556519-4494 100 2,888 2,888
Volvo Lastvagnar Sverige AB (former Volvo Korea Holding AB), Sweden 556531-8572 100 2,355 2,655
Volvo China Investment Co Ltd., China –  100 1,302 1,302
Volvo Automotive Finance (China) Ltd., China –  100 491 491
Volvo Group UK Ltd., Great Britain3 –  35 350 216
Volvo Group Mexico SA, Mexico – 100 543 543
Volvo Group Venture Capital AB, Sweden 556542-4370 100 369 369
Volvo Powertrain AB, Sweden 556000-0753 100 898 898
Volvo Information Technology AB, Sweden 556103-2698 100 1,511 1,366
Volvo Parts AB, Sweden 556365-9746 100 200 200
Volvo Group Insurance Försäkrings AB, Sweden 516401-8037 100 182 182
Volvo Business Services AB, Sweden 556029-5197 100 118 –
Volvo Danmark A/S, Denmark –  100 157 157
VFS Servizi Financiari Spa, Italy4 –  25 101 79
Kommersiella Fordon Europa AB, Sweden 556049-3388 100 2,693 2,693
Volvo Norge AS, Norway –  100 50 50
Volvo Malaysia Sdn Bhd., Malaysia –  100 48 48
JSC Volvo Vostok, Russia5 –  75 177 34
Volvo Italia Spa, Italy6 –  65 559 729
Volvo Logistics AB, Sweden 556197-9732 100 85 –
Volvo Information Technology GB Ltd., Great Britain – 100 3 3
VFS Latvia SIA, Latvia –  100 9 9
VFS Int Romania Leasing Operational, Romania – 100 2 2
Volvo Equipamentos de Construcao, Latin America, Brazil – 100 830 –
Other holdings –  – 1 0
Total carrying value Group companies7   72,272 72,765

Holding of shares in Joint Ventures, associated companies and other   Dec 31, 2019  Dec 31, 2019 Dec 31, 2018
shares and participations Registration Percentage Carrying Carrying
number holding1 value2 value2
Dongfeng Commercial Vehicles Co. Ltd., China – 45,0 7,197 7,197
VE Commercial Vehicles Ltd., India8 – 45,6 1,616 1,616
Blue Chip Jet II HB, Sweden 969717-2105 50,0 176 76
Other investments – 9 9
Total carrying value, joint ventures, ­associated companies and other shares and participations 8,998 8,898

13:1
184
 GROUP PERFORMANCE 2019 PARENT COMPANY NOTES

14
1 T he percentage holding refers to the parent ­company AB Volvo’s holding.
2R  efers to AB Volvo’s carrying value of its holding.
3 Total holding by Volvo Lastvagnar AB and AB Volvo is 100%. OTHER RECEIVABLES
4T  otal holding by Volvo Italia Spa and AB Volvo is 100%.
5T  otal holding by AB Volvo and Volvo Trucks Region Central Europe GmbH
is 100%.
6 Total holding by Renault Trucks (SAS), Volvo Lastvagnar AB, Dec 31, Dec 31,
AB Volvo Penta and AB Volvo is 100%. 2019 2018
7 A B Volvo’s share of shareholders’ equity in ­subsidiaries (including
equity in untaxed reserves) was SEK 139,883 M (129,867). Accounts receivable 7 12
8 In Volvo Group the company is reported as a joint venture, Prepaid expenses and accrued income 53 54
consolidated according to equity method.
Other receivables 300 52
Shares and participations in group companies B/S   Total other receivables 360 118
During 2019 shares in Volvo Equipamentos de Construcao Latin America
14:1
has been received in form of dividend from Volvo Holding Sverige AB by
SEK 830 M. Shareholder´s contribution has been paid to Alviva AB by
There is no valuation allowance for doubtful receivables at the end of the
SEK 32 M and Alviva AB has been divested with carrying value of SEK 32
year. Fair value is not considered to differ from carrying value.
M. Impairment of Volvo Construction Equipment AB has been made by
SEK 2,554 M. This impairment refers to previous ownership of Volvo

15
Construction Equipment N.V. which was transferred to Volvo Construc-
tion AB 2018 as a shareholder´s contribution. Impairment has been made
in Volvo Lastvagnar Sverige AB by SEK 300 M and Volvo Italia Spa by
SEK 170 M. Reversal of impairments has been made in Volvo Bussar AB
UNTAXED RESERVES
by SEK 1,054 M, Volvo Information Technology AB by SEK 145 M, JSC
Volvo Vostok by SEK 143 M, Volvo Group UK by SEK 134 M, Volvo Busi-
ness Services AB by SEK 118 M, Volvo Logistics AB by SEK 85 M and   Dec 31, Dec 31,
VFS Servizi Financiari Spa by SEK 22 M. 2019 2018
During 2018 shares in Volvo Construction Equipment N.V. was trans-
Tax allocation reserve 10,000 6,000
ferred to Volvo Construction Equipment AB in form of shareholder´s con-
tribution by SEK 3,082 M. Redemption of shares in Volvo Group UK was Accumulated additional depreciation:
made by SEK 345 M. Shareholder´s contribution of SEK 1,305 M was Machinery and equipment 0 1
paid to Volvo Construction Equipment AB in form of 100% holding of B/S   Total untaxed reserves 10,000 6,001
Volvo CE Europe SAS, 100% holding of Volvo Compact Equipment SAS
and 90% of the holding in Volvo CE Germany. Shareholder´s contribution 15:1

of SEK 500 M was paid to Volvo Holding Sverige AB in form of shares in

Volvo Treasury Canada Inc. Reversal of impairment in Volvo Penta AB was
made by SEK 148 M, in Volvo Financial Services AB by SEK 722 M, in
Volvo Italia Spa by SEK 282 M, in Volvo Norge AS by SEK 8 M, in Volvo
China Investment Co Ltd by SEK 99 M and in Kommersiella Fordon AB by
SEK 802 M.
In December 2019, the Volvo Group announced the intention to trans-
fer ownership of the complete UD Trucks business globally from the Volvo
Group to Isuzu Motors.

Investments in joint ventures and associated companies

During 2019 capital contribution has been paid to Blue Chip Jet II HB by
SEK 100 M.
No significant transactions has affected the value of investments in
joint ventures and associated companies during 2018.

Other shares and participations

No significant transactions has affected the value of other shares and
participations during 2019 and 2018.

185
 GROUP PERFORMANCE 2019 PARENT COMPANY NOTES

16 PROVISIONS FOR POST-EMPLOYMENT BENEFITS

The parent company has two types of pension plans, defined contribution
plans and defined benefit plans.
Defined contribution plans: post-employment benefit plans where the Provisions for post-employment Dec 31, Dec 31,
company makes regular payments to separate entities and has no legal or benefits 2019 2018
constructive obligation to pay further contributions. The expenses for Obligations1 –948 –921
defined contribution plans are recognized during the period when the
Fair value of plan assets 931 788
employee provides service.
Funded status –17 –133
Defined benefit plans: post-employment benefit plans where the com-
pany’s undertaking is to provide predetermined benefits that the employee Limitation on assets in accordance with
will receive on or after retirement. These benefit plans are secured through RFR2 (when plan assets exceed
corresponding obligations) –231 –125
balance sheet provisions or pension fund contributions. Furthermore, a
credit insurance policy has been taken out for the value of the obligations. B/S  Net provisions for post-employment
­benefits2 –248 –258
The main defined benefit plan is the ITP2 plan which is based on final
salary. The plan is semi-closed, meaning that only new employees born
16:3
before 1979 have the possibility to choose the ITP2 solution. The ITP2
1 The ITP2 obligations amount to SEK –683 M (–645).
plan for the company is funded in Volvo Pension Foundation. Pension obli- 2 ITP2 obligations, net, amount to SEK 0 M (0).
gations are calculated annually, on the balance sheet date, based on actu-
arial assumptions.
The defined benefit obligations are calculated based on the actual
­salary levels at year-end and based on a discount rate of 3.84% (3.84) for Pension costs 2019 2018
the ITP2 plan and 0.7 % (0.6) for other pension obligations. Assumptions
Service costs 32 195
for discount rates and mortality rates are determined annually by PRI Pen-
Interest costs3 29 26
sionsgaranti for ITP2 and Finansinspektionen for other pension obliga-
Interest income3 –2 –30
tions, respectively.
Pension costs for defined benefit plans 59 191
The Volvo Pension Foundation was formed in 1996 to secure obliga-
tions relating to retirement pensions in accordance with the ITP plan. Pension costs for defined contribution plans 62 65
Since its formation, net contributions of SEK 284 M have been made to
Special payroll tax/yield tax4 67 42
the foundation by the parent company.
Provisions for post-employment benefits in the parent company’s Cost for credit insurance FPG 5 4
­balance sheet correspond to the present value of obligations at year end, Total costs for the period 193 302
less fair value of plan assets.
16:4
3 Interest cost, net of SEK 2 M (1) is included in financial items.
4 Special payroll tax/yield tax are calculated according to Swedish Tax law
Obligations in defined and accrued for in current liabilities.
benefit plans Funded Unfunded Total
Volvo Group applies IAS 19 Employee Benefits in the consolidated finan-
Obligations opening balance 2018 633 103 736 cial statements. This implies differences, which may be significant, in the
Service costs 26 169 195 accounting of defined benefit pension plans as well as in the accounting
Interest costs 25 1 26 of plan assets invested in the Volvo Pension Foundation.
Benefits paid –21 –15 –36 The accounting principles for defined benefit plans differ from IAS 19
Obligations as of mainly relating to:
December 31, 2018 663 258 921 • Pension liability calculated according to Swedish accounting principles
Service costs 31 1 32 does not take into account future salary increases.
Interest costs 27 2 29 • The discount rate used in the calculations is set by PRI Pensions­garanti
Benefits paid –21 –13 –34 and Finansinspektionen, respectively.
Obligations as of • Changes in the discount rate, actual return on plan assets and other
December 31, 2019 700 248 948
actuarial assumptions are recognized directly in the income statement
and in the balance sheet.
16:1
• Deficit must be either immediately settled in cash or recognized as a
liability in the balance sheet.

Fair value of plan assets in funded plans • Surplus cannot be recognized as an asset, but may in some cases be
refunded to the company to offset pension costs.
Plan assets opening balance 2018 800
Actual return on plan assets –12
Contributions and compensation
to/from the fund –
Plan assets as of December 31, 2018 788

Actual return on plan assets 110

Contributions and compensation to/from the fund 33
Plan assets as of December 31, 2019 931

186 16:2
 GROUP PERFORMANCE 2019 PARENT COMPANY NOTES

17 NON-CURRENT LIABILITIES 20 CASH-FLOW

Non-current debt matures as follows:

Other non-cash items 2019 2018

Revaluation of shareholdings 1,324 –2,056

Dividend in form of shares/Gains on
2020–2024 5,591 sale of shares –830 –1,831
2025 or later 4 Anticipated dividend –301 –
B/S   Total non-current liabilities 5,595 Transfer price adjustments, net –58 –178
Other changes 41 70
17:1 Total Other items not affecting cash
flow 176 –3,995

18
20:1

OTHER LIABILITIES Further information is provided in note 5 Income from investments in

Group companies, note 6 Income from investments in joint ventures and
associated companies and note 7 Income from other investments.

Dec 31, Dec 31,

2019 2018
Acquired and divested shares in
Wages, salaries and withholding taxes 294 302 Group companies, net 2019 2018
Accrued expenses and prepaid income 480 239 Acquisitions –32 –
Other liabilities 5 6 Divestments 13 371
B/S   Total other liabilities 779 547 Total cash flow from acquired and divested
shares in Group companies, net –19 371
18:1
20:2
No collateral is provided for current liabilities.
Acquisitions and divestments of participations in group companies are
shown in note 13 Investments in shares and participations.

19 CONTINGENT LIABILITIES Acquired and divested shares in

non-Group companies, net 2019 2018
Contingent liabilities as of December 31, 2019, amounted to SEK 307,460
M (296,380) of which SEK 307,194 M (296,166) pertained to group Acquisitions –101 –1
companies. Divestments – –
Credit guarantees are included to an amount corresponding to the Total cash flow from acquired and
credit limits. Credit guarantees amounted to SEK 284,992 M (277,018). divested shares in non-Group
companies, net –101 –1
The total amount pertained to group companies.
The utilized portion at yearend amounted to SEK 139,894 M (124,956),
20:3
of which SEK 139,871 M (124,934) pertained to group companies.
Acquisitions and divestments of participations in non-group companies
are presented in note 13 Investments in shares and participations.

Change in loans, net Non-current Current

liabilities to liabilities to
Group companies Group companies

Loan Volvo Loan/Cashpool

Treasury AB Treasury AB

December 31, 2017 13,973 19,337

Cash flows – –5,790
Other – 7
December 31, 2018 13,973 13,554
Cash flows – 4,377
Reclassification –8,384 8,384
Other – 8
December 31, 2019 5,589 26,323

20:4

187
 CORPORATE
CORPORATE GOVERNANCE
GOVERNANCE CORPORATE
CORPORATE GOVERNANCE
GOVERNANCE REPORT
REPORT 2019
2019

C O RP O R AT E GOV ERN A N C E

CORPORATE
GOVERNANCE
REPORT 2019
The Volvo Group appreciates sound corporate governance as a fundamental base
in promoting its long-term strategic objectives and in achieving a trusting relation
with shareholders and other key stakeholders. High standards when it comes to
transparency, reliability and ethical values are guiding principles within the Volvo
Group’s operations.

The Swedish Corporate ­Governance Code Corporate Governance Model

AB Volvo’s shares are admitted to trading on the stock exchange Nasdaq
Stockholm’s main market. As a listed company, Volvo applies the Swedish
Corporate Governance Code (the Code), which is available at
www.corporategovernanceboard.se.
This Corporate Governance Report has been prepared in accordance
with the Swedish Annual Accounts Act and the Code, and is separate
from the Annual and Sustainability Report. The report has been reviewed
by Volvo’s auditors and includes a report from the auditors.
At the General Meetings of AB Volvo, which is the Parent Company of the
Volvo Group, the shareholders exercise their voting rights with regard to
for example the composition of the Board of Directors of AB Volvo and the
election of auditors.
An Election Committee, appointed by the Annual General Meeting of
AB Volvo, submits proposals to the General Meeting concerning the elec-
tion of Board members and Board Chairman as well as proposals for reso-
lutions concerning remuneration of the Board. When applicable, the Elec-
tion Committee also submits proposals to the General Meeting for the
election of external auditors and for resolutions concerning fees to the
auditors.
The Board is ultimately responsible for Volvo’s organization and the
management of its operations.
In addition, the Board appoints the President and CEO of AB Volvo. The
CEO is in charge of the daily management of the Group in accordance
with the guidelines provided by the Board.

188
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019

1
Shareholders

Vote at the General Meetings

AB VOLVO

2 Elects Auditor
General Meeting

Appoints Submits proposals concerning election of Board

5 Audit Committee
6 Remuneration
Committee
Election members, auditors and Election Committee for
Committee the upcoming Annual General Meeting.
8 Auditor
3 Election Committee

7 Technology
and Business
Elects Board
Transformation Committe

Prepare
part of the
Board’s work.
4
Board of Directors
The auditors review
the interim report for
the period January 1
to June 30 and audit
Appoints President/CEO the annual report
and ­consolidated
10 financial ­s tatements.

11
President/CEO

9 Corporate Audit

12 Internal Control over

Financial Reporting

11
Group Executive Board
Business Areas/
Truck Divisions

Operations

189
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019
1 SHARES AND SHAREHOLDERS
AB Volvo (publ) is a CSD company, which means that the share register is
maintained by Euroclear Sweden AB. On December 31, 2019, Volvo had
250,798 shareholders according to the share register. The largest share-
holder, in terms of votes on that date was AB Industrivärden, with 25.2
percent of the votes based on the number of shares outstanding. As per the
same date, Geely Holding held 15.7 percent of the votes, AMF Insurance &
Funds held 5.3 percent of the votes, Alecta held 5.0 percent of the votes
and Norges Bank Investment Management held 4.1 percent of the votes,
based on the number of shares outstanding.
Volvo has issued two classes of shares: series A and series B. At a Gen-
eral Meeting, series A shares carry one vote and series B shares one-tenth
of a vote. The two share classes carry equal rights in the assets and earn-
ings of the company. According to a special share conversion clause in the
Articles of Association, holders of series A shares are entitled to request
that their series A shares be converted to series B shares. Implementation
of such conversions entail that the total number of votes in the company
decreases.
For more information about the Volvo share and its shareholders,
please refer to the Board of Director’s Report on pages 99–101 of the
Annual and Sustainability Report.
Chairman of the Board, Carl-Henric Svanberg at AB Volvo’s Annual General Meeting 2019.
190
2 GENERAL MEETING
General
The General Meeting is Volvo’s highest decision-making body. The Annual
General Meeting is held within six months of the end of the fiscal year,
normally in Gothenburg, Sweden.
In addition to what follows from applicable law regarding shareholders’
right to participate at General Meetings, under Volvo’s Articles of Associa-
tion shareholders must give notice of their attendance (within the time
stated in the convening notice) and notify the company of any intention to
bring assistants.
A shareholder who wants the Meeting to consider a particular matter
must submit a request to the Board in sufficient time prior to the Meeting
to the address provided on Volvo’s website, www.volvogroup.com.
Annual General Meeting 2020
Volvo’s Annual General Meeting for 2020 will be held on Wednesday,
April 8, 2020 in Konserthuset, Göteborg. For further information about
the Annual General Meeting 2020, please refer to the fold-out at the end
of the Annual and Sustainability Report and Volvo’s website,
www.volvogroup.com.
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019
3 ELECTION COMMITTEE
Duties
The Election Committee is elected by the General Meeting. The Election
Committee shall perform the tasks that are incumbent upon the Election
Committee according to its instructions from the General Meeting and
the rules of the Code. The main task is to prepare and present proposals to
the Annual General Meeting on behalf of the shareholders for the election
of Board members, Chairman of the Board and Board remuneration and,
when applicable, proposals for auditors and fees to the auditors.
In addition, the Election Committee presents proposals for members of
the Election Committee for the following year, in accordance with prevail-
ing instructions for Volvo’s Election Committee.
Composition
In accordance with the instructions for Volvo’s Election Committee
adopted by the Annual General Meeting 2019, the Annual General Meet-
ing shall elect five members to serve on the Election Committee, of whom
four shall represent the largest shareholders in the company, in terms of
votes who have expressed their willingness to participate in the Election
Committee. In addition, one of the members shall be the Chairman of the
AB Volvo Board.
Volvo’s Annual General Meeting 2019 resolved to appoint the following
individuals as members of the Election Committee:
• Bengt Kjell (AB Industrivärden)
• P är Boman (Svenska Handelsbanken, SHB Pension Fund, SHB
Employee Fund, SHB Pensionskassa and Oktogonen)
• Ramsay Brufer (Alecta)
• Carine Smith Ihenacho (Norges Bank Investment Management)
• Carl-Henric Svanberg, Chairman of the Board.
The Election Committee appointed Bengt Kjell as Chairman of the ­Election
Committee.
4 BOARD OF DIRECTORS
Duties
The Board is ultimately responsible for Volvo’s organization and manage-
ment of the company’s operations. The Board is responsible for the
Group’s long-term development and strategy, for regularly controlling and
evaluating the Group’s operations and for the other duties set forth in the
Swedish Companies Act.
Composition
In 2019, AB Volvo’s Board consisted of ten members elected by the
Annual General Meeting and three members and two deputy members
appointed by employee organizations. According to the Articles of Asso-
ciation, the Board shall consist of not less than six and not more than
twelve members elected by the General Meeting.
The Annual General Meeting 2019 re-elected Matti Alahuhta, Eckhard
Cordes, Hanne de Mora, Eric Elzvik, James W. Griffith, Martin Lundstedt,
Kathryn V. Marinello, Martina Merz, Helena Stjernholm and Carl-Henric
Svanberg as Board members and the Annual General Meeting re-elected
Carl-Henric Svanberg as Chairman of the Board. An account of each
Board member’s age, principal education, professional experience,
assignments in the company, other significant assignments, their own
and related parties’ ownership of shares in Volvo as of February 24, 2020,
independence and the year they were elected to the Volvo Board, is pre-
sented in the “Board of Directors” section on pages 196–197.
Prior to the Annual General Meeting 2019, the Election Committee
announced that it had applied the provisions of rule 4.1 of the Code as
board diversity policy. The aim is that the Board as a collective should pos-
sess the required mix in terms of background and knowledge, whereby an
even gender distribution is taken into particular account. The result of the
Election Committee’s application of the diversity policy is a Board that
represents a mix of both professional experience and knowledge as well
as geographical and cultural backgrounds. 40 percent of the Board mem-
bers elected by the Annual General Meeting are women.
Independence requirements
The Board of Directors of AB Volvo is subject to the independence require-
ments prescribed in the Code.
Prior to the Annual General Meeting 2019, the Nomination Committee
presented the following assessment of the independence of Board mem-
bers elected at the Annual General Meeting 2019.
Carl-Henric Svanberg, Matti Alahuhta, Eckhard Cordes, Hanne de Mora,
Eric Elzvik, James W. Griffith, Kathryn V. Marinello and Martina Merz
were all considered independent of the company and company manage-
ment, as well as the company’s major shareholders.
Martin Lundstedt, as President of AB Volvo and CEO of the Volvo
Group, was considered independent of the company’s major shareholders
but not of the company and company management.
Helena Stjernholm was considered independent of the company and
company management. Since AB Industrivärden, prior to the Annual Gen-
eral Meeting 2019, controlled more than 10 percent of the votes in the
company, Helena Stjernholm, due to her capacity as President and CEO
of AB Industrivärden, was not considered independent in relation to one
of the company’s major shareholders.
191
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019
Work procedures
Every year, the Board adopts work procedures for the Board’s work.
The work procedures outline how the Board’s duties should be distrib-
uted, including the specific role and duties of the Chairman, instructions
for the division of duties between the Board and the President and for the
reporting of financial information to the Board. The Board has also
adopted specific instructions for the Board’s committees, which are
linked to the work procedures.
The Board’s work in 2019
The Board’s work is mainly performed within the framework of formal
Board meetings and through meetings in the respective committees of
the Board. In addition, regular contact is maintained between the Chair-
man of the Board and the CEO in order to discuss ongoing business and
to ensure that the Board’s decisions are executed.
In 2019, there were nine regular Board meetings, one extraordinary
Board meeting and one statutory Board meeting. The attendance of
Board members at these meetings is presented in the table on page 195.
The Company’s auditor attended one Board meeting during the year.
During 2019, business cycle management has continued to be high on
the Board’s agenda and there was a high focus on volume flexibility in the
industrial system and tight cost control across the organization.
Another focus area for the Board has been new technologies and, through-
out the year, the Board has paid particular attention to the Group’s strategic
focus on disruptive technology trends and initiatives within the areas of digi-
talization, electrification and automation. During 2019, the Group entered
into a number of strategic alliances and partnerships strengthening the
Group’s research and development of new technologies. Another focus area
has been the strategy for the Group’s truck business in Asia.
The Board also decided on an overall financial plan and investment frame-
work for the Group’s operations, including increased investments in R&D for
both electrification and combustion engines to reduce CO2 emissions. In
addition, the Board regularly monitors the Group’s earnings and financial
position and maintains continuous focus on risk related issues such as overall
risk management and ongoing legal disputes and investigations. Further,
throughout the year, the Board has devoted considerable time to talent
review and succession planning and on the review and follow-up of the Com-
pany’s quality work.
By allocating time to business reviews of the Group’s various truck divi-
sions and business areas the Board remains continuously up-to-date on the
status and development of the Group’s operations. In June 2019, the Board
visited the Company’s operations in Skövde in Sweden and, in October
2019, the Board visited the Group’s operations in Brazil.
One of the Board’s committees, the Business Area Committee was
replaced by the Technology and Business Transformation Committee in April
2019. The Board thereby strengthened its focus on new technologies and
the development of new business models.
192
Evaluation of the Board’s work
In 2020, the Board performed its yearly evaluation of the Board’s work dur-
ing the previous year. The purpose of the evaluation is to further develop the
Board’s efficiency and working procedures and to determine the main
focus of the Board’s coming work. In addition, the evaluation serves as a
tool for determining the competence required by the Board and for analyz-
ing the competence that already exists in the current Board. By that, the
evaluation also serves as input for the Election Committee’s work with pro-
posing Board members.
As part of the yearly evaluation, Board members were asked to com-
plete a questionnaire and assess various areas related to the Board’s work
from their own perspective. The areas evaluated for 2019 included the
Board’s composition, the management and focus of Board meetings,
Board support and how the Board addresses issues related to strategy,
potential risks and succession planning. The areas covered by the evalua-
tion may differ from one year to another to reflect the development of the
Board’s work and the Volvo Group.
Separate evaluations were conducted of the Board as a collective, of
the Chairman of the Board, the Audit Committee, the Remuneration Com-
mittee and the Technology and Business Transformation Committee. The
results of the evaluations of the Board as a collective and of the Chairman
were discussed by the Board. The results of the evaluations of the com-
mittees were, or will be, discussed by the relevant committee. In addition,
the results of the evaluations of the Board as a collective and of the Chair-
man are shared with the Election Committee.
Remuneration of Board Members
The Annual General Meeting resolves on fees to be paid to the Board
members elected by the Annual General Meeting. For information about
Board remuneration adopted by the Annual General Meeting 2019, please
refer to Note 27 in the Group’s notes in the Annual and Sustainability
Report.
Remuneration of Board members, 2019
(from AGM on April 3, 2019) SEK
Chairman of the Board 3,600,000
Board member 1 1,060,000
Chairman of the Audit Committee 380,000
Member of the Audit Committee 175,000
Chairman of the Remuneration Committee 160,000
Member of the Remuneration Committee 115,000
Chairman of the Technology and Business
Transformation Committee2 190,000
Member of the Technology and Business
Transformation Committee2 160,000
1 With the exception of the CEO.
2 Previously named Business Area Committee.
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019
The Board’s committees
5 AUDIT COMMITTEE
Duties
The Board has an Audit Committee primarily for the purpose of supervis-
ing the accounting and financial reporting processes and the audit of the
annual financial statements.
The Audit Committee’s duties include preparing the Board’s work to
assure the quality of the Group’s financial reporting by reviewing interim
reports, the Annual and Sustainability Report and the consolidated
accounts. The Audit Committee also has the task of reviewing and over-
seeing the Group’s legal and taxation matters as well as compliance with
laws and regulations that may have a material impact on financial report-
ing. Furthermore, the Audit Committee has the task of reviewing and
overseeing the impartiality and independence of the company’s auditors.
The Audit Committee is also responsible for evaluating both internal and
external auditors’ work and, when applicable, handling the tender process
for audit services. In addition, it is the Audit Committee’s task to preap-
prove what other services, beyond auditing, the company may procure
from the auditors. The Audit Committee also adopts guidelines for trans-
actions with companies and persons closely associated with Volvo.
Finally, the Audit Committee evaluates the quality, relevance and effec-
tiveness of the Group’s system for internal control over financial reporting,
as well as with respect to the internal audit and risk management, and
discharge any other duties of an audit committee according to law or its
instructions.
Composition and work in 2019
At the statutory Board meeting following the Annual General Meeting
2019, the following Board members were appointed members of the
Audit Committee:
• Hanne de Mora
• Eric Elzvik
• Helena Stjernholm.
In October 2019, the Board visited the Group’s operations in Brazil.
Hanne de Mora was appointed Chairperson of the Audit Committee.
The Audit Committee met with the external auditors without the pres-
ence of management on four occasions in 2019 in connection with Audit
Committee meetings. The Audit Committee regularly met with the Head
of Corporate Audit in connection with Audit Committee meetings.
According to the Swedish Companies Act, the members of the Audit
Committee may not be employees of the company and at least one mem-
ber of the Audit Committee shall be independent and have accounting or
auditing expertise. In addition, the Code stipulates that a majority of the
members of the Audit Committee shall be independent of the company
and the company management, and that at least one of the members who
is independent of the company and the company management shall also
be independent of the company’s major shareholders. The Election Com-
mittee’s assessment of independence prior to the Annual General Meet-
ing 2019 is presented above under the “Independence requirements”
section on page 191.
The Audit Committee and the external auditors, among other tasks,
discussed the external audit plan and the view of risk management. The
Audit Committee held nine regular meetings and one extraordinary meet-
ing during 2019. The attendance of Board members at the Committee
meetings is presented in the table on page 195. The Audit Committee
reports the outcome of its work to all members of the Board on a regular
basis and the minutes of the Audit Committee meetings are distributed to
Board members.
193
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019

Board of Directors (cont.)

6 REMUNERATION COMMITTEE 7 TECHNOLOGY AND BUSINESS TRANSFORMATION COMMITTEE

Duties Duties
The Board has a Remuneration Committee for the purpose of preparing The Board’s committee Business Area Committee was, in April 2019,
and deciding on issues relating to the remuneration of senior executives in replaced by the Technology and Business Transformation Committee,
the Group. The duties of the Committee include making recommendations with focus on new technologies and the development of new business
to the Board on the Board’s decisions regarding terms of employment and models.
remuneration of the CEO and the deputy CEO of AB Volvo, principles for
the remuneration, including pensions and severance payments, of other Composition and work in 2019
members of the Group Executive Board and principles for variable salary At the statutory Board meeting following the Annual General Meeting
systems, share based incentive programs and for pension and severance 2019, the following Board members and deputy member were appointed
payment structures for other senior executives in the Group. members of the Technology and Business Transformation Committee:
The Remuneration Committee shall also monitor and evaluate ongoing • Carl-Henric Svanberg
programs and programs concluded during the year for the variable remu- • Matti Alahuhta
neration of senior executives, application of the guidelines for the remu- • Lars Ask
neration of senior executives on which the Annual General Meeting shall • Mari Larsson
decide, and the current remuneration structures and levels in the Group. • Kathryn V. Marinello
The Board shall, no later than three weeks prior to the Annual General • Martina Merz
Meeting, present the results of the Remuneration Committee’s evaluation • Helena Stjernholm.
on the company’s website.
Carl-Henric Svanberg was appointed Chairman of the Technology and
Composition and work in 2019 Business Transformation Committee.
At the statutory Board meeting following the Annual General Meeting The Technology and Business Transformation Committee held three
2019, the following Board members were appointed members of the meetings in 2019. The attendance of Board members at Committee meet-
Remuneration Committee: ings is presented in the table on page 195. The Technology and Business
• Carl-Henric Svanberg Transformation Committee reports the outcome of its work to all members
• Matti Alahuhta of the Board on a regular basis.
• James W. Griffith
• Mikael Sällström.

Carl-Henric Svanberg was appointed Chairman of the Remuneration

Committee.
The Code sets the requirement that members of the Remuneration
Committee, with the exception of the Board Chairman if being a member
of the Remuneration Committee, shall be independent of the company
and company management. The Election Committee’s assessment of the
independence of members of the Remuneration Committee in accord-
ance with the requirements in the Code, prior to the Annual General Meet-
ing 2019, is presented under “Independence requirements” on page 191.
The Remuneration Committee held four meetings in 2019. The attend-
ance of Board members at Committee meetings is presented in the table
on page 195. The Remuneration Committee reports the outcome of its
work to all members of the Board on a regular basis.

194
 CORPORATE
CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT
REPORT 2019
2019

The Board’s composition and attendance at meetings January 1, 2019 – December 31, 2019

Technology and
Business
Board (11 incl. Audit Remuneration Transformation
Member statutory) Committee (10) Committee (4) Committee (3)
Carl-Henric Svanberg 11 4 3
Martin Lundstedt 11
Matti Alahuhta 11 4 3
Eckhard Cordes 11
Hanne de Mora 11 10
Eric Elzvik 11 10
James Griffith 11 4
Kathryn Marinello 11 3
Martina Merz 11* 2
Helena Stjernholm 11 10 3
Lars Ask, employee representative 8 2
Mats Henning, employee representative 11
Camilla Johansson, employee representative 11
Mari Larsson, employee representative 11 3
Mikael Sällström, employee representative 11 4
Total number of meetings 11 10 4 3

*December 2019 two-day Board meeting: present one day.

195
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019

BOARD OF DIRECTORS
BOARD ­M EMBERS
ELECTED BY THE
ANNUAL GENERAL
MEETING

Carl-Henric Svanberg Matti Alahuhta Eckhard Cordes Hanne de Mora Eric Elzvik
Chairman of the Board, Member of the Remuneration Chairman of the Audit Member of the Audit
­Chairman of the Remuneration Committee, Member of the Committee Committee
Committee, Chairman of the Technology and Business
Technology and Business Transformation Committee
Transformation Committee

Education MSc in Applied Physics, MSc, Dr Sc. MBA and PhD, University of BA in Economics from HEC MSc Business Administra-
Linköping Institute of Tech- Doctor of Science, Helsinki Hamburg. in Lausanne, MBA from IESE tion, Stockholm School of
nology, BSc Business Admin- University of Technology. in Barcelona. Economics.
istration, University of Uppsala.

Born 1952 1952 1950 1960 1960

Member of the Chairman of the Volvo Board Since April 2, 2014. Since April 1, 2015. Since April 14, 2010. Since April 5, 2018.
Volvo Board since April 4, 2012.

Position and Board Chairman of the Academy:
­memberships The Royal Swedish Academy
of Engineering Sciences (IVA)
and Chairman of the
­European Round Table of
Industrialists.
Board Chairman: DevCo
­Partners Oy and Outotec
­Corporation.
Board member: Kone
­Corporation and ABB Ltd.
Partner in Cevian Capital and
EMERAM Capital Partners.
Board Chairman: Bilfinger SE.
Member of the Executive
­Committee of Eastern
­European Economic Relations
of German Industry.
Board Chairperson: a-con-
nect (group) ag.
Board Member: IMD Super­
visory Board and Outotec Oyj.
Board Chairman: IP-Only/
GlobalConnect Group.
Board member: Telefon­
aktiebolaget LM Ericsson,
Landis+Gyr Group AG,
Fenix Marine Services and
VFS Global.

Principal Has held various positions at
work experience Asea Brown Boveri (ABB)
and Securitas AB, President
and CEO of Assa Abloy AB,
President and CEO of Telefon­
aktiebolaget LM Ericsson,
member of the External
Advisory Board of the Earth
Institute at Columbia
University, the Advisory
Board of Harvard Kennedy
School and Board Chairman
of BP plc.
Has held several manage-
ment positions in the Nokia
Group – President of Nokia
Telecommunications, Presi-
dent of Nokia Mobile Phones
and Chief Strategy Officer of
the Nokia Group, President of
Kone Corporation between
2005–2014 and between
2006–2014 also CEO.
Started within Daimler Benz
AG in 1976, where he has
held several manage­ment
positions, such as Head of the
trucks and buses business,
Head of Group Controlling,
Corporate Development and
M&A in AEG AG and CEO of
­Mercedes Car Group.
­Previously CEO of Metro AG,
senior advisor at EQT and
Board ­member of Air Berlin,
SKF, Carl Zeiss and Rhein-
metall AG. Since 2012
­partner in Cevian Capital and
EMERAM Capital Partners
respectively.
Credit Analyst Den Norske
C
­ redit­bank in Luxemburg
1984. Various positions
within brand management
and controlling within Procter
& Gamble 1986–1989, Part-
ner McKinsey & ­Company,
Inc. 1989–2002, one of the
founders and owners, also
Board Chairperson of the
global consulting firm and tal-
ent pool a-connect (group) ag
since 2002.
Joined ABB in 1984 and has
held several management
positions in the Finance
­function at ABB in Sweden,
Singa­pore and Switzerland –
most recently as Group CFO
between 2013 and 2017 and
previously as CFO for the
Divisions Discrete Automa-
tion & Motion and Automa-
tion Products and a position
as Head of Mergers & Acqui-
sitions and New Ventures and
also as Head of Corporate
Development. Industrial
­advisor to private equity.

Holdings in Volvo, 2,000,000 Series B shares. 146,100 Series B shares. None. 6,000 Series B shares. 7,475 Series B shares.
own and related ­parties

BOARD MEMBERS APPOINTED BY THE EMPLOYEE ORGANISATIONS

Lars Ask Mats Henning Mikael Sällström

Employee representative, ordinary member Employee representative, ordinary member Employee representative, ordinary member
Member of the Technology and Business Member of the Remuneration Committee
­Transformation Committee

Born 1959 1961 1959

Member of the Ordinary member since April 6, 2016. Since May 9, 2014. Since September 7, 2009.
Volvo Board Deputy member from June 16, 2009–2016.

Background within Volvo With Volvo since 1982. With Volvo since 1982. With Volvo 1980–1999 and since 2009.

Holdings in Volvo, None. 293 Series A shares, 500 Series B shares. 293 Series A shares.
own and related parties

196
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019

James W. Griffith Martin Lundstedt Kathryn V. Marinello Martina Merz Helena Stjernholm
Member of the Remuneration President and CEO Member of the Technology Member of the Technology Member of the Audit
Committee and Business Transformation and Business Transformation ­Committee, Member of the
Committee Committee Technology and Business
­Transformation Committee

BSc Industrial Engineering, MSc, Chalmers University of BA from State University of BS from University of Cooperative MSc Business Administration,
MBA from Stanford Technology. New York at Albany, MBA from Education, Stuttgart. Stockholm School of Economics.
University. Hofstra ­University.

1954 1967 1956 1963 1970

Since April 2, 2014. Since April 6, 2016. Since April 2, 2014. Since April 1, 2015. Since April 6, 2016.

Board member: Illinois Tool President and CEO of AB Volvo. President and CEO of Hertz President and CEO of Thyssen­ President and CEO of
Works Inc. Board Chairman: Permobil AB. Global Holdings. krupp AG. AB  Industri­värden.
Board Member: ACEA Commer- Board Member: Deutsche Board Member: AB Industri­
cial Vehicle and Concentric AB. ­Lufthansa AG (supervisory board), värden, Sandvik AB and Telefon­­
Member of the Royal Swedish SAF Holland SA and Imerys SA. aktie­bolaget LM E­ ricsson.
Academy of Engineering S ­ ciences
(IVA). Advisory Member of the
Swedish National Innovation
Council.

Began his career at The T­ imken
Company in 1984, where he has
held several management posi-
tions, such as responsible for Tim-
ken’s b
­ earing business activities in
Asia, the Pacific and Latin Amer-
ica and for the c
­ ompany’s auto-
motive b­ usiness in North America.
Until 2014 President and CEO at
Timken Company.
President and CEO of Scania
2012–2015. Prior to that, v­ arious
managerial positions at Scania
since 1992. Co-chairman of the
UN Secretary-­General’s High-
Level Advisory Group on Sustain-
able Transport 2015–2016.
Has held several management
positions at Citibank, Chemical
Bank New York (now JP Morgan
Chase), First Bank Systems and
First Data Corporation, Division
President General Electric Finan-
cial Assurance Partnership Mar-
keting and Division President
General Electric Fleet Services,
President and CEO of Ceridian
Corporation and subsequently
also Chairman, Board Chairman,
President and CEO of Stream
Global Services, Inc. Senior
­Advisor, Ares Management, LLC.
Board Member of Nielsen,
­RealPage, General Motors Co.
and MasterCard US.
Until January 2015, CEO for
Chassis Brakes International.
Has, during almost 25 years held
various management positions in
Robert Bosch GmbH, most
recently as Executive Vice Presi-
dent Sales and Marketing in the
Chassis System Brakes division
combined with responsibility for
regions China and Brazil and
­previously CEO of the subsidiary
Bosch Closure Systems, also
member of the Board of Manage-
ment of Brose Fahrzeugteile
GmbH & Co.
Between 1998–2015, employed
by the private equity firm IK
Investment Partners (former
Industri Kapital) where she held
various positions. She was a
­Partner with responsibility for the
Stockholm office. She was also a
member of IK’s Executive
­Committee. Prior to that she
worked as a consultant for Bain &
­Company.

40,000 Series B shares. 191,884 Series B shares. None. 4,500 Series B shares. 8,000 Series B shares.

DEPUTIES APPOINTED BY THE EMPLOYEE ORGANISATIONS SECRETARY TO THE BOARD

Camilla Johansson Mari Larsson Sofia Frändberg

Employee representative, deputy member Employee representative, deputy member Secretary to the Board
Member of the Technology and Business Master of Laws
T
­ ransformation Committeee

1966 1978 1964

Deputy member since April 6, 2016. Deputy member since May 22, 2015. Secretary to the Board since April 1, 2013.

With Volvo since 1997. With Volvo since 2004. Executive Vice President Group Legal &
Compliance and General Counsel.

643 Series A shares. 605 Series A shares. 1,738 Series A shares, 67,624 Series B shares.

197
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019
8 EXTERNAL AUDITING
Volvo’s auditors are elected by the Annual General Meeting. The auditors
review the interim report for the period January 1 to June 30 and audit the
annual financial statements and consolidated accounts. The auditors also
review the Corporate Governance Report and confirms whether the
Group has presented a Sustainability Report. The auditors report the
results of their audit in the Audit Report and in an opinion on the Corpo-
rate Governance Report, and provides an opinion on whether the guide-
lines for remuneration to senior executives have been complied with,
which they present to the Annual General Meeting.
The current auditor Deloitte AB, was elected at the Annual General
Meeting 2018 for a period of four years. Jan Nilsson is responsible for the
audit of Volvo and Auditor-in-Charge.
For information about Volvo’s remuneration of the auditors, please refer
to Note 28 “Fees to the auditors” in the Group’s notes in the Annual and
Sustainability Report.
198
9 CORPORATE AUDIT
Volvo’s internal audit function, Corporate Audit, supports Volvo in enhanc-
ing and protecting organizational value by providing risk-based, inde-
pendent and objective assurance, advice and insight. Corporate Audit
helps the organization to accomplish its objectives by bringing a system-
atic, disciplined approach to evaluate and to improve the effectiveness of
risk management, control and governance processes.
Corporate Audit performs internal audits in selected focus areas, iden-
tified through an independent risk assessment process and approved by
the Audit Committee. In addition, special assignments requested by man-
agement and the Audit Committee are performed. The audits cover,
among other things, assessments on the adequacy and effectiveness of
the organization’s processes for controlling its activities and managing its
risks and evaluation of compliance with policies and directives.
Corporate Audit also assists in investigations of suspected breaches of
the Code of Conduct and of suspected fraudulent activities within the
organization and coordinates and provides oversight of other control and
monitoring functions.
The head of Corporate Audit reports directly to the CEO, the Group’s
General Counsel and the Board’s Audit Committee.
For additional information on internal control over financial reporting,
see pages 204–205.
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019

10 GOVERNANCE PRINCIPLES AND ORGANIZATIONAL STRUCTURE

Volvo’s strategy Governance documents

The Volvo Group’s mission is to “Drive prosperity through transport solu-
tions”. The Group’s products and services are continuously developed to
support sustainable societies and the well-being and safety of people. With
this mission in mind, the Volvo Group strives to achieve its vision to be the
most desirable and successful transport solution provider in the world.
The Volvo Group’s aspirations are to have leading customer satisfaction
for all of its brands in each segment; to be the most admired employer in
the industry and to have industry leading profitability. The Group’s values
– Customer Success, Trust, Passion, Change and Performance – are the
cornerstone of the Group’s company culture. The Volvo Group Code of
Conduct clearly defines expectations on the way the Group runs its busi-
ness – not just in a few places, but wherever the Group operates. The
Code of Conduct summarizes what the Volvo Group stands for and what
Volvo expects from its employees. Seven strategic priorities set the direc-
tion for the Group. They describe the key fundamentals of the Volvo Group
strategy such as customer focus, decentralization, empowerment and
Another key component of the Group’s governance is its policies and
directives, such as the Code of Conduct and policies pertaining to invest-
ments, financial risks, accounting, financial control and internal audit,
which contain Group-wide operating and financial rules for the opera-
tions, as well as responsibility and authority structures.
Organizational structure
The business of the Volvo Group was organized into nine Business Areas
during 2019. Of these, four represent brand-specific Business Areas for
trucks: Volvo Trucks, Mack Trucks, Renault Trucks and UD Trucks and
JVs, each with profit and loss responsibility for their respective business.
The other Business Areas are Volvo Construction Equipment, Volvo
Buses, Volvo Penta, Volvo Financial Services (VFS) and Arquus.
VO LV O G R O U P

P&L responsibility for its brand organizations, continuous improvements

as well as the importance of utilizing the Group strengths to increase syn- M
M I SS I O N
N
ergies, profitability and to take leadership in key technologies.
Based on the Group’s strategic priorities, each Business Area defines
VISION
its own operational plans. The long-term plans, such as the Group’s indus-
trial and product plans, are also crucial parts of the Group’s strategic
AS
ASPP I R AT I O
ONNSS
direction.

VA ES
VA LU ES

CCO
ODDE
E OF CON
NDDU
UCCTT

Volvo Group organization

President and CEO

Executive Assistant &

Deputy CEO
Head of CEO Office

Group Finance Group Human Resources

Group Legal & Compliance Group Communication

BUSINESS AREAS

Renault Mack Volvo UD Trucks Volvo Volvo Volvo

Arquus VFS VAS
Trucks Trucks Trucks & JVs CE Buses Penta

TRUCK DIVISIONS Value

SDLG
Truck
Group Trucks Technology
DFCV
Group Trucks Operations

Group Trucks Purchasing VECV

Executive Board members

199
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019
Governance principles and organizational structure (cont.)
From 1 January 2020 Volvo Autonomous Solution (VAS) was established
as a new business area, focusing on the development, commercialization
and sales of autonomous transport solutions, and since then the Volvo
Group is organized in ten Business Areas.
The Trucks Business is further organized into three divisions: Group
Trucks Technology (GT T), Group Trucks Operations (GTO) and Group
Trucks Purchasing (GTP).
GT T is responsible for product development of engines, transmissions
and trucks. GTO is responsible for the production of trucks and the
Group’s engines and transmissions, as well as for the Group’s spare parts
supply and logistics operation. GTP has overall responsibility for purchas-
ing for the Group’s trucks, engines and transmissions operations as well
as for the Group’s purchase of indirect products and services.
In addition, there are four Group Functions: Group Human Resources,
Group Finance, Group Communication and Group Legal & Compliance,
tasked with supporting the CEO and the Group Executive Board with
expertise within each Group Function area and with developing standards
for the entire organization through policies, directives and guidelines. In
addition, there are other functions that provide services and/or products
for the entire Group, such as Group IT and Accounting & Company Control.
With this governance model, Volvo can utilize the synergies of having
global organizations for manufacturing, product development and pur-
chasing, while maintaining clear leadership and responsibility for each
truck brand to make sure that customer needs are met. The aim of the
governance model is that all Business Areas are driven according to the
same distinct business principles, whereby each Business Area can follow
and optimize its own earnings performance in the long and short term.
200
11 GROUP EXECUTIVE BOARD AND GROUP MANAGEMENT
The Group Executive Board comprises 15 members.
In addition to the CEO and the deputy CEO, the Group Executive Board
comprises the Executive Vice Presidents of the three Group Truck Divisions,
the Executive Vice Presidents of the five Business Areas Volvo Trucks, Mack
Trucks, Renault Trucks, UD Trucks and JVs and Volvo Construction Equip-
ment, and the Executive Vice Presidents of the four Group Functions. The
members of the Group Executive Board report directly to the CEO. On­
1 January, 2020 Scott Rafkin assumed the position as Executive Vice
President and Chief Digital Officer and joined the Group Executive Board.
The Presidents of the Business Areas Volvo Buses, Volvo Penta,
Arquus, VFS and Volvo Autonomous Solutions also report directly to the
CEO and are part of an extended Group Management Team together with
the members of the Group Executive Board. In addition, the President of
the new Business Area, Volvo Autonomous Solutions, joined the Group
Management Team from 1 January 2020.
The CEO is responsible for managing the day-to-day operations of the
Volvo Group and is authorized to make decisions on matters that do not
require Board approval. The CEO leads the operations of the Group mainly
through the Group Executive Board and the extended Group Manage-
ment Team.
Key decisions related to the Group’s offering and technology portfolio
are made by the Product Board.
Quality-related matters are addressed in the Quality Board in order to
support fast decision-making and customer focus in this area.
At special meetings for Sales & Operations Planning (S&OP), decisions
are made regarding a production plan aimed at optimizing the Volvo
Group’s overall profitability. The purpose of the meetings is to balance
demand with supply chain capabilities, drive capacity management and
provide directions for the Group’s sales and operations activities.
All of the above bodies affect control and monitoring of the Group’s
financial development, strategies and targets, and make decisions regard-
ing investments and other matters.
 CORPORATE GOVERNANCE
Remuneration of the Group Executive Board
Annually, AB Volvo’s Annual General Meeting resolves on a policy for
remuneration of the Group Executive Board, based on a proposal from the
Board. For information about the remuneration policy adopted by the
Annual General Meeting 2019, please refer to Note 27 “Personnel” in the
Group’s notes in the Annual and Sustainability Report.
Martin Lundstedt, President and CEO, at the Annual General Meeting 2019.
CORPORATE GOVERNANCE REPORT 2019
Changes to the Group Executive Board
On January 1, 2019 Diana Niu assumed the position as Executive Vice Pres-
ident Group Human Resources for the Volvo Group, replacing Kerstin
Renard, and joined the Group Executive Board. In addition, on January 1,
2019 Roger Alm assumed the position as President Volvo Trucks and joined
the Group Executive Board. On 1 January, 2020 Scott Rafkin assumed the
position as Executive Vice President and Chief Digital Officer and joined the
Group Executive Board.
201
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019

GROUP EXECUTIVE BOARD

Martin Lundstedt Jan Gurander Roger Alm Bruno Blin Sofia Frändberg Andrea Fuder Melker Jernberg
President and CEO Deputy CEO Executive Vice Executive Vice Executive Vice ­Executive Vice Executive Vice
­President Volvo Group ­President Volvo Group ­President Group Legal ­President Volvo Group ­President Volvo Group
and President Volvo and P­ resident Renault & ­Compliance and Trucks Purchasing and and P
­ resident Volvo
Trucks Trucks ­General Counsel Chief Purchasing C­ onstruction Equip-
Officer for Volvo Group ment
Education

MSc. MSc. MBA. Master of Laws. MSc and MBA. MSc Mechanical
­Engineering.
­experience Born

1967 1961 1962 1963 1964 1967 1968

Principal work

President and CEO of Deputy CEO & CFO Senior Vice President After having worked Responsible for Group Has worked in Quality CEO and President
AB Volvo and 2016–2018. CFO & Volvo Trucks Europe for several companies Legal & Compliance and Logistic and held at Höganäs AB 2014–
member of the Group Executive Vice Presi- 2016–2018. Senior in the manufacturing, and General Counsel various senior posi- 2017. Executive Vice
Executive Board dent Volvo Group Vice President Volvo ­quality and purchas- of the Volvo Group tions at Volkswagen’s President, Business
since October 2015. 2014–2016. CFO & Group Trucks North- ing areas, he joined since April 2013. Purchasing organiza- Area EMEA at SSAB
President and CEO of Senior Vice President ern Europe 2015– Renault Trucks Pur- Head of Corporate tion since 1992. Head 2011–2014. Has held
Scania 2012–2015. Finance Volvo Car 2016. President Volvo chasing in 1999. Has Legal at AB Volvo of Purchasing at Sca- various positions at
Prior to that, ­various Corporation 2011– Group Trucks Latin held several senior 1998–2013. Corpo- nia 2012–2016. Scania AB since
managerial ­positions 2013. CFO MAN America 2012–2014. positions over the rate Legal ­C ounsel at Member of the Group 1989, most recently
at Scania since 1992. ­Diesel & Turbo SE President Volvo years until being AB Volvo 1994–1997. Executive Board since as Senior Vice Presi-
Co-chairman of the 2010. CFO MAN Die- Trucks Latin America appointed Senior Vice Member of the Group 2017. With Volvo dent Buses and
UN Secretary- sel SE 2008–2009. 2010–2011. President of Volvo Executive Board since since 2017. Coaches at Scania AB
General’s High-Level Group Vice President ­Managing Director Group Purchasing. April 2013. With 2007–2011. ­Member
Advisory Group on and CFO Scania AB Volvo Trucks, Region Has also served as Volvo since 1994. of the Group Execu-
Sustainable Transport 2001–2006. Presi- East 2004–2009. Senior Vice President, tive Board since 2018.
2015–2016. dent of Business Unit With Volvo since Group Truck Sales
Finance AB Volvo 1989. Member of the South Europe January
1999–2001. Senior Group Executive 2013–2016. Member
Vice President & Board since January of the Group Execu-
Finance Director 2019. tive Board since
­Scania AB 1998– March 2016. With
1999. Member of the Volvo since 1999.
Group Executive
Board since 2014.
With Volvo 1999–
2001 and since 2014.
Board
memberships

Chairman of Permobil Board Member of Secretary to the AB

AB. Board Member Teknikföretagen Volvo Board since
of ACEA C­ ommercial and Skanska AB. April 2013.
Vehicle and Con­
centric AB. Member
of the Royal Swedish
Academy of
­Engineering Sciences
(IVA) and Advisory
member of the
S­wedish National
Innovation Council.
Holdings in
Volvo, own
and related
­parties

191,884 Series B 73,825 Series B 398 Series A shares, 25,165 Series B 1,738 Series A shares, 1,600 Series A shares, 17,277 Series B
shares. shares. 14,918 Series B shares. 54,212 Series B 36,348 Series B shares.
shares. shares. shares.

202
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019

Diana Niu Jan Ohlsson Scott Rafkin Joachim Lars Stenqvist Martin Weissburg Kina Wileke Jan Ytterberg
Executive Vice Executive Vice Executive Vice ­Rosenberg Executive Vice Executive Vice Executive Vice Executive Vice
­President Group ­President Group ­P resident and Executive Vice ­President Group ­President Volvo ­President Group ­President Group
Human Resources Trucks ­Operations Chief Digital Officer ­President Volvo Trucks ­Technology Group and Presi- ­Communication Finance and CFO
for Volvo Group Group and Chair- dent Mack Trucks
man of UD Trucks

MBA and BA in MSc. BBA (Bachelors in MSc Industrial MSc Industrial Master of Business MA in journalism. MSc in Business
­Economics. Business Adminis- Engineering and ­Engineering. Management, BSc Administration and
tration), University Management, MSc Industrial Manage- Economics.
of Massachusetts Financial Econom- ment.
at Amherst. ics, MSc Business
and Economics.

1966 1953 1969 1970 1967 1962 1974 1961

Joined Volvo Senior Vice Presi- Executive Vice Executive Vice Executive Vice President Mack Responsible for CFO of Husqvarna
Group in February dent Powertrain President and Chief President Volvo ­P resident Group Trucks since 2018. Group Communi- Group 2015–2018.
2005, with SVP Production Group Digital Officer Group and Chair- Trucks Technology President Volvo cations since Executive Vice
HR jobs in two Trucks Operations Volvo Group since man UD Trucks and Volvo Group Construction 2018. With the ­P resident and CFO
Business Areas, 2012–2016. 2020. President 2016-. Executive Chief Technology Equipment 2014– Volvo Group since of ­Scania Group
Trucks Asia Pacific 2001–2012 Gen- Volvo Financial Vice President Officer since Octo- 2017. President & 2008, most 2006–2015. Vari-
and Volvo Con- eral Manager Euro- Services 2014– Group Trucks Sales ber 2016. Head of CEO Volvo Finan- recently as Senior ous positions in
struction Equip- pean Manufactur- 2019. Chief Finan- 2015–2016. Exec- R&D and CTO at cial ­Services 2010 Vice President accounting and
ment. Worked for ing Volvo Trucks. cial Officer Volvo utive Vice Presi- Volkswagen Truck –2014. President Brand, Communi- finance, ­Scania
Ericsson from July Member of the Financial Services dent Group Trucks & Bus 2015–2016. Volvo Financial cation & ­Marketing Group 1987–
1993 to January Group Executive 2010–2014. Sales & M ­ arketing Senior Vice Presi- Services Americas Volvo Penta 2016– 2006. Member of
2005 in a number Board since April Senior Vice Presi- APAC 2012–2014. dent Vehicle Defi- 2005–2010. Prior 2017, Senior Vice the Group Execu-
of leadership posi- 2016. With Volvo dent Global Opera- President Volvo nition R&D at Sca- to Volvo, President President External tive Board since
tions. Member of since 1979. tions Volvo Finan- Group Asia Truck nia 2007–2015. Woodard LLC, Corporate ­November 2018.
the Group Execu- cial Services Operations 2007– Prior to that vari- President Great Communi­cation
tive Board since 2003–2009. Sen- 2011. Vice Presi- ous senior posi- Dane Financial Volvo Group
January 2019. ior Vice President dent Volvo Group tions at Scania Services and Sen- 2012–2016 and
Risk Volvo Finan- ­A lliance Office since 1992. Mem- ior Vice President CEO Communica-
cial Services 2007. Vice Presi- ber of the Group ORIX. Member of tion Volvo Group
2001–2002. dent Volvo Executive Board the Group Execu- 2008–2012. Has
Prior to 2001, held Powertrain 2005– since 10 October tive Team 2010– held a number of
several senior posi- 2007. Consultant 2016. With Volvo 2014. Member of positions in T V4
tions with Volvo with McKinsey & Group since Octo- the Group Execu- Group 1998–
Car Finance North Company 1996– ber 2016. tive Board since 2008. Member of
America. Prior to 2004. Member of March 2016. the Group Execu-
Volvo, Business the Group Execu- tive Board since
Assurance and tive Board since 2018.
Capital Markets 2012. With Volvo
Manager Coopers since 2005.
& Lybrand LLC
(predecessor firm
to PriceWater-
houseCoopers).

Volvo Group repre- Board Member of Board Member of

sentative for Japan ­Handelsbanken Madrague.
Auto­mobile Manu- Regionbanken
facturers Associa- Västra Sverige
tion (JAMA). and International
Chamber of
Commerce (ICC),
Sweden.

46,022 Series B 45,568 Series B 45, 120 Series B 87 Series A shares, 23,789 Series B 111,863 Series B 344 Series A 2,031 Series B
shares. shares. shares. 190,143 Series B shares. shares. shares, 14,840 shares.
shares. Series B shares.

203
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019

12 INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board is responsible for the internal controls according to the Swedish
Companies Act and the Code. The purpose of this report is to provide share-
holders and other interested parties with an understanding of how internal
control is organized at Volvo with regard to financial reporting. The descrip-
tion has been designed in accordance with the Swedish Annual Accounts
Act and is thus limited to internal control over financial reporting.
Introduction
Volvo has a function for internal control with the objective to provide sup-
port for management, allowing them to continuously provide solid internal
controls relating to financial reporting. Work that is conducted through
this function is primarily based to ensure compliance with directives and
policies, and to create effective conditions for specific control activities in
key processes related to financial reporting. The Audit Committee is regu-
larly informed of the results of the work performed by the Internal Control
function within Volvo with regard to risks, control activities and follow-up
on the financial reporting.
Volvo also has an internal audit function, Corporate Audit, which among
other things, independently monitors that companies in the Group follow
the principles and rules that are stated in the Group’s directives, policies
and instructions for financial reporting. The head of the Corporate Audit
function reports directly to the CEO, to the Group’s General Counsel and
the Board’s Audit Committee.
Control environment
Fundamental to Volvo’s control environment is the business culture that is
established within the Group and in which managers and employees
operate. Volvo works actively on communication and training regarding
the company’s basic values included in the Group’s Code of Conduct, to
ensure that the business conducted by the organization is characterized
by good ethics, integrity and is in compliance with the law.
The foundation of the internal control process relating to the financial
reporting is based on the Group’s directives, policies and instructions, as
well as the organization’s responsibility and authority structure. The prin-
ciples for Volvo’s internal controls and directives and policies for the finan-
cial reporting are contained in the Volvo Group Management System, a
group wide management system comprising, among other things,
instructions, rules and principles.
Risk assessment
Risks relating to financial reporting are evaluated and monitored by the
Board through the Audit Committee inter alia through identifying risks
that could be considered as material, and through the mitigating control
objectives. The risk assessment is based on a number of criteria, such as
the complexity of the accounting principles, revaluation principles of
assets or liabilities, complex and/or changing business circumstances,
etc. The risks together with mitigating control objectives are collected in
a framework for internal control over financial reporting, Volvo Internal
Control Standard (VICS).
Control activities
In addition to the Board of Directors of AB Volvo and its Audit Committee,
the management groups and other decision-making bodies in the Group
constitute overall supervisory bodies. Business processes are designed to
ensure that potential errors or deviations in the financial reporting are pre-
vented, discovered and corrected by implementing control activities that
correspond to the control objectives defined in the VICS framework. Con-
trol activities range from review of outcome results against earlier periods
and forecasts in management group meetings to specific reconciliation of
accounts and analyses of the ongoing processes for financial reporting.
Information and communication
Policies and instructions relating to the financial reporting are updated
and communicated on a regular basis from management to all affected
employees. The Group’s financial reporting function has direct operating
responsibility for the daily financial reporting and works to ensure a uni-
form application of the Group’s policies, principles and instructions for the
financial reporting and to identify and communicate shortcomings and
areas of improvement in the processes for financial reporting.
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204
 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2019

AUDITOR’S REPORT ON THE CORPORATE

GOVERNANCE STATEMENT

Follow-up To the Annual General Meeting of the shareholders of AB Volvo, corporate

Ongoing responsibility for follow-up rests with the Group’s financial identity number 556012-5790
reporting function. In addition, the Corporate Audit and the Internal Con-
trol function conduct review and follow-up activities in accordance with Engagement and responsibility
what is described in the introduction of this report. More specifically, the The Board of Directors is responsible for that the corporate governance
Internal Control function runs and coordinates evaluation activities statement on pages 188–205 has been prepared in accordance with the
through the “Volvo Group Internal Control Programme”, with the purpose Annual Accounts Act.
of systematically evaluating the quality of the internal control over finan-
cial reporting on an annual basis. An annual evaluation plan is established The scope of the audit
and presented to the Audit Committee. This evaluation program com- Our examination of the corporate governance statement is conducted in
prises three main areas: accordance with FAR’s auditing standard RevU 16 The auditor’s examina-
tion of the corporate governance statement. This means that our examina-
1. Group-wide controls: Self-assessment procedure carried out by man-
tion of the corporate governance statement is different and substantially
agement teams at business area, Group Function and company levels.
less in scope than an audit conducted in accordance with International
The main areas evaluated are compliance with the Group’s financial
Standards on Auditing and generally accepted auditing standards in
directives and policies and the Group’s Code of Conduct.
­Sweden. We believe that the examination has provided us with sufficient
2. Process controls at transaction level: Processes related to the financial basis for our opinions.
reporting are evaluated by testing procedures/controls based on the
framework for internal control over financial reporting, Volvo Internal Opinion
Control Standards (VICS). A corporate governance statement has been prepared. Disclosures in
accordance with chapter 6 section 6 the second paragraph points 2–6 of
3. General IT controls: Processes for maintenance, development and
the Annual Accounts Act and chapter 7 section 31 the second paragraph
access management of financial applications are evaluated by testing
the same law are consistent with the other parts of the annual accounts
procedures and controls.
and consolidated accounts and are in accordance with the Annual
Accounts Act.
The results of the evaluation activities are reported to Group management
and the Audit Committee. During 2019, the Internal Control function
reported four times to the Audit Committee regarding the annual evalua-
tion plan, status on outstanding issues and final assessment of the control
Göteborg, February 24, 2020
environment.

Deloitte AB

Jan Nilsson
Göteborg, February 24, 2020
Authorized Public Accountant

AB Volvo (publ)
The Board of Directors

205
 OTHER INFORMATION 2019
PROPOSED POLICY FOR REMUNERATION
TO SENIOR EXECUTIVES
The Board of Directors’ of AB Volvo (publ) proposal for guidelines
for executive remuneration (remuneration policy)
These guidelines (AB Volvo’s remuneration policy) concern the remunera-
tion and other terms of employment for the members of the Volvo Group
Executive Board (“Executives”).
The guidelines are forward-looking, i.e. they are applicable to remuner-
ation agreed, and amendments to remuneration already agreed, after the
proposed adoption of these guidelines by the 2020 annual general meet-
ing. These guidelines do not apply to any remuneration decided or
approved by the general meeting. Any new share-based incentive plans
will, where applicable, be resolved by the general meeting, but no such
plan is currently proposed.
The guidelines’ promotion of the Volvo Group’s business strategy,
­long-term interests and sustainability
It is a prerequisite for the successful implementation of the Volvo Group’s
business strategy and safeguarding of its long-term interests, including
its sustainability, that the Group can recruit, retain and develop top exec-
utives. These guidelines enable AB Volvo to offer Executives a competi-
tive total remuneration. More information regarding the Volvo Group’s
business strategy is available in the Volvo Group Annual and Sustainability
Report.
Types of remuneration
Volvo Group remuneration to Executives shall consist of the following
components: base salary, short-term and long-term variable incentives,
pension benefits and other benefits.
Short-term incentives may, for the President & CEO, amount to a max-
imum of 100 per cent of the base salary and, for other Executives, a max-
imum of 80 per cent of the base salary.
Long-term incentives may, for the President & CEO, amount to a max-
imum of 100 per cent of the base salary and, for other Executives, a max-
imum of 80 per cent of the base salary. The current long-term incentive
plan for the Group’s top executives, including the Executives, was intro-
duced in connection with the 2016 annual general meeting. The objective
of the program is to align the interests of the top executives with those
of the Group shareholders. The program does that by a combination
of ­a performance based award and a requirement to purchase and hold
­A B Volvo shares. The program is funded on an annual basis by an award,
measured against performance criteria established by the Board of
­Directors. The after tax portion of this payment must be immediately
invested in AB Volvo shares which must be held for a minimum of three
years. In this way, the top executives are rewarded for the performance of
the Group each year, and will have a vested interest over the longer term
in changes in the value of the shares. At the end of the three year period,
top executives may sell their shares, if they meet the requirement for own-
ing shares valued at two years of the pre-tax base salary for the President
& CEO and one year of the pre-tax base salary for the other Executives.
The holding requirements for the Executives shall cease upon termination
of an Executive’s employment, and the Board of Directors may grant such
other exceptions to the requirements as the Board deems appropriate.
206
Further cash remuneration may be awarded in extraordinary circum-
stances, provided that such extraordinary arrangements are limited in
time and only made on an individual basis, either for the purpose of
recruiting or retaining Executives, or as remuneration for extraordinary
performance beyond the individual’s ordinary tasks. Such remuneration
may not exceed an amount corresponding to 100 per cent of the annual
base salary. Any resolution on such remuneration shall be made by
the Board of Directors based on a proposal from the Remuneration
­C ommittee.
For the President & CEO, pension benefits shall be granted on the basis
of a defined contribution plan except where law or collective agreement
would require a defined benefit pension. The pensionable salary shall
include base salary and short-term incentives. The pension contributions
for the President & CEO attributable to the annual base salary shall
amount to not more than 35 per cent of the base salary, and contributions
attributable to short term incentives shall not exceed the corresponding
proportion.
Other benefits may include, for example, life insurance, medical and
health insurance, and company cars. Premiums and other costs relating to
such benefits may amount to not more than 3 per cent of the annual base
salary for the President & CEO.
For other Executives, pension benefits shall be granted on the basis of
a defined contribution except where law or collective agreement require a
defined benefit pension. The pensionable salary shall include base salary
and short-term incentives. The pension contributions for other Executives
attributable to the annual base salary shall amount to not more than
40 per cent of the base salary and contributions attributable to short term
incentives shall not exceed the corresponding proportion.
Other benefits may include, for example, life insurance, medical and
health insurance, and company cars. Premiums and other costs relating to
such benefits may amount to not more than 10 per cent of the annual base
salary for other Executives.
Remuneration for Executives that reside outside Sweden or reside in
Sweden but having a material connection to or having been residing in a
country other than Sweden may be duly adjusted to comply with manda-
tory rules or local practice, taking into account, to the extent possible, the
overall purpose of these guidelines.
In addition to remuneration set out above, Executives who relocate for
the purposes of the position or who work in other multiple countries may
also receive such remuneration and benefits as are reasonable to reflect
the special circumstances associated with such arrangements, taking
into account the overall purpose of these guidelines and alignment with
the general policies and practices within the Volvo Group applicable to
cross border work.
Termination of employment
Upon termination of an Executive’s employment, the notice period may
not exceed twelve months. Base salary during the notice period and sev-
erance pay may not together exceed an amount corresponding to the base
salary for two years.
Executives that reside outside Sweden or reside in Sweden but having
a material connection to or having been residing in a country other than
Sweden may be offered notice periods for termination and severance pay-
ment as are reasonable to reflect the special circumstances, taking into
account the overall purpose of these guidelines and alignment with the
general policies and practices within the Volvo Group.
 OTHER INFORMATION 2019

Criteria for awarding variable cash remuneration, etc.
Short-term and long-term incentives shall be linked to predetermined and
measurable criteria. The criteria – which for example may relate to EBIT,
cash flow, return on capital employed or similar ratios, or sustainability
targets – shall be devised to promote the Volvo Group’s strategy and
long-term value creation and strengthen the link between achieved per-
formance targets and reward. The criteria for short-term and long-term
incentives shall be determined by the Board of Directors annually. The
satisfaction of the criteria shall be measured over periods of one year
each.
To which extent the criteria for awarding variable remuneration has
been satisfied shall be determined when the relevant measurement period
has ended. The Board of Directors is responsible for the determination of
variable remuneration to all Executives.
Claw-back and adjustments
Executives participating in the Volvo Group’s current short-term and long-
term incentive plans are obligated, in certain circumstances and for spec-
ified periods of time, to repay, partially or in its entirety, variable incentive
awards already paid if payments have been made by mistake or been
based on intentionally falsified data or in the event of material restatement
of the Volvo Group’s financial results. Furthermore, the Board of Directors
may decide on adjustments of pay-out under the incentive plans (before
payment has been made) in case of extraordinary circumstances or to
adjust for unforeseen one-timers.
Derogation from the guidelines
The Board of Directors may temporarily resolve to derogate from the
guidelines, in whole or in part, if in a specific case there is special cause for
the derogation and a derogation is necessary to serve the Volvo Group’s
long-term interests, including its sustainability, or to ensure the Group’s
financial viability. As set out above, the Remuneration Committee’s tasks
include preparing the Board of Directors’ resolutions in remuneration-re-
lated matters. This includes any resolutions to derogate from the guide-
lines.
Description of material changes to the guidelines
Due to new legislation passed in 2019, the proposed guidelines for exec-
utive remuneration submitted to the 2020 annual general meeting are
more detailed than before. In addition, the short-term and long-term
incentives may be linked to EBIT, cash flow, return on capital employed or
similar ratios, or sustainability targets, instead of EBIT and cash flow only.
Additional information regarding executive remuneration in the Volvo
Group is available in the Volvo Group Annual and Sustainability Report.

Salary and employment conditions for employees

In the preparation of the Board of Directors’ proposal for these remunera-
tion guidelines, the Board has considered that the various benefits offered
to the Executives need to be aligned with the general structures applica-
ble for employees of AB Volvo at levels that are competitive in the market.
Thus, salary and employment conditions for other AB Volvo employees
have been taken into account by including information thereon in the
Remuneration Committee’s and the Board of Directors’ basis of decision
when evaluating whether the guidelines and the limitations set out herein
are appropriate.

The decision-making process to determine, review and implement the

guidelines
The Board of Directors has established a Remuneration Committee. The
Committee’s tasks include preparing the Board of Directors’ decision to
propose guidelines for executive remuneration. The Board of Directors
shall prepare a proposal for new guidelines at least every fourth year and
submit it to the general meeting. The guidelines shall be in force until new
guidelines are adopted by the general meeting. The Remuneration Com-
mittee shall also monitor and evaluate plans for variable remuneration for
Executives, the application of the guidelines for executive remuneration
as well as the current remuneration structures and compensation levels in
the Group. The members of the Remuneration Committee are independ-
ent of AB Volvo and its executive management. The President & CEO and
other members of the executive management do not participate in the
Board of Directors’ processing of and resolutions regarding remunera-
tion-related matters in so far as they are affected by such matters.

207
 OTHER INFORMATION 2019

PROPOSED DISPOSITION OF
UNAPPROPRIATED EARNINGS

AB Volvo SEK  According to the Board of Directors’ opinion, the proposed dividend
Retained earnings 31,318,868,893.19
Income for the period 2019 22,009,411,836.89
Total retained earnings 53,328,280,730.08
The Board of Directors proposes that the above sum be disposed of
as ­follows:
SEK  In addition to what has been stated above, the Board of Directors has
To the shareholders, an ordinary dividend
of SEK 5.50 per share and an extraordinary
dividend of SEK 7.50, for a total of 26,434,877,092.00
To be carried forward 26,893,403,638.08
Total 53,328,280,730.08
The record date for determining who is entitled to receive dividends is
proposed to be Tuesday April 14, 2020.
In view of the Board of Directors’ proposal to the Annual General
­Meeting to be held April 8, 2020 to decide on the distribution of an ordi-
nary dividend of SEK 5.50 per share and an extraordinary dividend of SEK
7.50 per share, the Board hereby makes the following statement in
accordance with Chapter 18, Section 4 of the Swedish Companies Act.
The Board of Directors concludes that the Company’s restricted equity
is fully covered after the proposed dividend. The Board further concludes
that the proposed dividend is justifiable in view of the parameters set out
in Chapter 17, Section 3, second and third paragraphs of the Swedish
Companies Act. In connection herewith, the Board wishes to point out the
following.
The proposed dividend reduces the Company’s solvency from 52.2%
to 38.9% and the Group’s solvency from 27.0% to 23.1%, calculated as
per year end 2019. The Board of Directors considers this solvency to be
satisfactory with regard to the business in which the Group is active.
will not affect the Company’s or the Group’s ability to fulfill their payment
obligations and the Company and the Group are well prepared to handle
both changes in the liquidity and unexpected events.
The Board of Directors is of the opinion that the Company and the Group
have capacity to assume future business risks as well as to bear contingent
losses. The proposed dividend is not expected to adversely affect the
Company’s and the Group’s ability to make further commercially justified
investments in accordance with the Board of Directors’ plans.
considered other known circumstances which may be of importance for
the Company’s and the Group’s financial position. In doing so, no circum-
stance has appeared that does not justify the proposed dividend.
If the Annual General Meeting resolves in accordance with the Board of
Directors’ proposal, SEK 26,893,403,638.08 will remain of the
­C ompany’s non-restricted equity, calculated as per year end 2019.
The Board of Directors has the view that the Company’s and the
Group’s shareholders’ equity will, after the proposed dividend, be suffi-
cient in relation to the nature, scope and risks of the business.
The Board of Directors and the President certify that the annual finan-
cial report has been prepared in accordance with generally accepted
accounting principles and that the consolidated accounts have been pre-
pared in accordance with the international set of accounting standards
referred to in Regulation (EC) No 1606/2002 of the European Parliament
and of the Council of 19 July 2002 on the application of international
accounting standards, and give a true and fair view of the position and
profit or loss of the Company and the Group, and that the management
report for the Company and for the Group gives a fair review of the devel-
opment and performance of the business, position and profit or loss of the
Company and the Group, and describes the principal risks and uncertain-
ties that the Company and the companies in the Group face.

Göteborg, February 24, 2020

Carl-Henric Svanberg
Board Chairman

Matti Alahuhta Eckhard Cordes Eric Elzvik

Board member Board member Board member

James W. Griffith Martin Lundstedt Kathryn V. Marinello

Board member President, CEO and Board member Board member

Martina Merz Hanne de Mora Helena Stjernholm

Board member Board member Board member

Lars Ask Mats Henning Mikael Sällström

Board member Board member Board member

Our audit report was issued on February 24, 2020

Deloitte AB

Jan Nilsson
Authorized Public Accountant

208
 OTHER INFORMATION 2019
AUDIT REPORT FOR AB VOLVO (PUBL)
To the general meeting of the shareholders of AB Volvo (publ)
corporate identity number 556012-5790
Report on the annual accounts and consolidated accounts
Opinions
We have audited the annual accounts and consolidated accounts of AB
Volvo (publ) for the financial year 2019-01-01–2019-12-31, except for the
sustainability report on pages 110–111. The annual accounts and consoli-
dated accounts of the company are included on pages 70–187, 206–208
and 212–214 in this document.
In our opinion, the annual accounts have been prepared in accordance
with the Annual Accounts Act and present fairly, in all material respects,
the financial position of the parent company as of 31 December 2019 and
its financial performance and cash flow for the year then ended in accord-
ance with the Annual Accounts Act. The consolidated accounts have been
prepared in accordance with the Annual Accounts Act and present fairly,
in all material respects, the financial position of the group as of 31 Decem-
ber 2019 and their financial performance and cash flow for the year then
ended in accordance with International Financial Reporting Standards
(IFRS), as adopted by the EU, and the Annual Accounts Act. The statutory
administration report is consistent with the other parts of the annual
accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders
adopts the income statement and balance sheet for the parent company
and the group.
Our opinions in this report on the annual accounts and consolidated
accounts are consistent with the content of the additional report that has
been submitted to the parent company’s and group company’s audit com-
mittee in accordance with the Audit Regulation (537/2014) Article 11.
Basis for Opinions
We conducted our audit in accordance with International Standards on
Auditing (ISA) and generally accepted auditing standards in Sweden. Our
responsibilities under those standards are further described in the Audi-
tor’s Responsibilities section. We are independent of the parent company
and the group in accordance with professional ethics for accountants in
Sweden and have otherwise fulfilled our ethical responsibilities in accord-
ance with these requirements. This includes that, based on the best of our
knowledge and belief, no prohibited services referred to in the Audit Reg-
ulation (537/2014) Article 5.1 have been provided to the audited company
or, where applicable, its parent company or its controlled companies
within the EU.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions.
Key Audit Matters
Key audit matters of the audit are those matters that, in our professional
judgment, were of most significance in our audit of the annual accounts
and consolidated accounts of the current period. These matters were
addressed in the context of our audit of, and in forming our opinion
thereon, the annual accounts and consolidated accounts as a whole, but
we do not provide a separate opinion on these matters.
Revenue recognition
Volvo Group’s recognized net sales relate mainly to revenues from the sale
of vehicles, services and aftermarket parts.
AUDIT REPORT
The accounting principles for revenue and management’s significant
judgments applied in relation thereto are further described in Note 7
“Revenue” to the annual report. The Company records its revenue from
sales the day control has been transferred to the customer, which usually
occurs on delivery of goods and sales of services over a defined period of
time when the service can be utilized.
There are certain transactions entered into by the Company that carry
increased levels of complexity, such as transactions with customers that
involve buy-back agreements or residual value guarantees. In these trans-
actions management need to assess whether or not control has been
transferred to the customer and at what point in time revenue shall be
recognized. The assessment is based on evaluating whether the customer
has a significant economic incentive to exercise the residual value com-
mitment or not. There is a high degree of judgement and estimation
involved in determining the transfer of control and depending upon the
outcome, it is key to ensure that the revenue is recognised at the correct
amount and in the correct period.
Audit procedures
Our audit procedures included, but were not limited to:
• assessing the revenue recognition policies with respect to IFRS 15 to
determine the Company designed appropriate revenue recognition
policies to recognize revenue in the correct period to correct amounts;
• evaluating the design and testing operational effectiveness of relevant
internal controls used for revenue recognition;
• inspecting a sample of sales agreements and evaluating if the Company
correctly assessed if the control had been transferred to the customer
and the accounting treatment for these type of sale transactions were
correctly applied;
• examining a sample of contract liabilities to determine if revenue was
recorded accurately and in the correct period.
Completeness and measurement of provision for product warranty
The Company grants certain product warranties to their end customers,
which are contractual warranties covering certain defects in material and
workmanship of Volvo products sold. Estimated warranty costs include
contractual warranty, goodwill warranty and campaign warranty, all of
which include a high degree of judgement and estimation. The accounting
principles for warranty and management’s significant judgments applied
in relation thereto are further described in Note 21 “Other Provisions” to
the annual report.
Estimated provisions for contractual warranties are recognized when
the Company’s products are sold, while provisions for goodwill warranties
are determined based on historical statistics. Provision for campaigns in
connection with specific quality problems are recognized when the cam-
paign is decided. The estimated provisions are determined based on cer-
tain management estimates, including key components such as historical
statistics considering known quality improvements and costs for remedy
of defaults.
During 2018, the Company detected an emissions control component
used in certain markets is degrading more quickly than expected, which
could cause the engines to exceed emissions limits for nitrogen oxides
(NOx). The initial provision for this campaign which was recorded in 2018,
included a high degree of judgment and estimation. As of the year ended
December 31, 2019, the Company has assessed the input assumptions
for continued relevance including performing statistical analysis and
assessing ongoing discussions with regulatory authorities.
209
 OTHER INFORMATION 2019
Audit procedures
Our audit procedures included, but were not limited to:
• assessing the warranty provision recognition policies with respect
to IFRS to determine the Company designed appropriate policies;
• evaluating the design and testing operational effectiveness of
relevant internal controls used within the warranty review process;
• selecting a sample of product warranty provisions:
– evaluating the process to determine the provision
– testing the completeness and accuracy of provision input
assumptions
– assessing the reasonableness of the Company’s calculations
for warranty provisions with the support of our internal actuarial
specialists
• reviewing internal Company documents to identify the completeness
of recorded campaign warranty provisions;
• assessment of the Company’s process for larger warranty campaigns,
evaluating the provision for NOx by reviewing the Company’s assess-
ment of relevant government demands, evaluating the continued
relevance of input assumptions, and assessing the results of the
Company’s statistical analyses.
Provisions for losses from claims from customers and other third parties
– EC Antitrust Settlement
In July 2016, the European Commission and Volvo Group reached a set-
tlement with regards to antitrust allegations made by the European Com-
mission in relation to Volvo Group and other companies in the truck man-
ufacturing industry. Following the adoption of the European Commission’s
settlement decision, the Company has received and may continue to
receive numerous third-party damages claims from customers and other
third parties alleging that they suffered loss by reason of the conduct cov-
ered in the decision. The accounting principles for provisions for legal dis-
putes is further described in Note 21 “Other Provisions” to the annual
report.
The recognition and measurement of any provisions recorded for such
legal disputes is complicated, requires the involvement of legal experts,
and depends upon the future outcomes of the private damages claims
which is uncertain. Due to these complexities, the valuation of any such
provisions is significantly impacted by management’s ultimate judgments
and best estimates. At December 31, 2019, the Company has not been
able to make a reliable estimate of the amount of any liability that could
arise from these claims, if any. Further information is disclosed in Note 24
“Contingent Liabilities” to the annual report.
Audit procedures
Our audit procedures included, but were not limited to:
• holding discussions with management and audit the documentation
and conclude how management and the board evaluated the claims;
• holding discussions with internal legal department and with Volvo
Group’s external legal advisors and attorneys in order to obtain an
understanding of the facts of the cases, new developments, and
assessments;
• reviewing internal minutes and documentation as well as reports from
the external legal advisors to corroborate the consistency of informa-
tion received;
• reviewing a sample of legal opinions from Volvo Group’s external legal
advisors;
• evaluating the appropriateness of the Company’s final conclusions;
• assessing the adequacy of the disclosures around the legal proceedings.
210
AUDIT REPORT
Other information than the annual accounts and consolidated accounts
This document also contains other information than the annual accounts
and consolidated accounts and is found on pages 1–69 and 215–227.
The Board of Directors and the President are responsible for this other
information.
Our opinion on the annual accounts and consolidated accounts does
not cover this other information and we do not express any form of assur-
ance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated
accounts, our responsibility is to read the information identified above and
consider whether the information is materially inconsistent with the annual
accounts and consolidated accounts. In this procedure we also take into
account our knowledge otherwise obtained in the audit and assess
whether the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, con-
clude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors and the President
The Board of Directors and the President are responsible for the prepara-
tion of the annual accounts and consolidated accounts and that they give
a fair presentation in accordance with the Annual Accounts Act and, con-
cerning the consolidated accounts, in accordance with IFRS as adopted
by the EU. The Board of Directors and the President are also responsible
for such internal control as they determine is necessary to enable the
preparation of annual accounts and consolidated accounts that are free
from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The
Board of Directors and the President are responsible for the assessment
of the company’s and the group’s ability to continue as a going concern.
They disclose, as applicable, matters related to going concern and using
the going concern basis of accounting. The going concern basis of
accounting is however not applied if the Board of Directors and the Pres-
ident intends to liquidate the company, to cease operations, or has no real-
istic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director’s
responsibilities and tasks in general, among other things oversee the
company’s financial reporting process.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether the
annual accounts and consolidated accounts as a whole are free from
material misstatement, whether due to fraud or error, and to issue an audi-
tor’s report that includes our opinions. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs and generally accepted auditing standards in Swe-
den will always detect a material misstatement when it exists. Misstate-
ments can arise from fraud or error and are considered material if, individ-
ually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these annual
accounts and consolidated accounts.
A further description of our responsibilities for the audit of the annual
accounts and consolidated accounts is located at the Swedish Inspector-
ate of Auditors website: www.revisorsinspektionen.se/revisornsansvar.
This description forms part of the auditor´s report.
Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated accounts,
we have also audited the administration of the Board of Directors and the
President of AB Volvo (publ) for the financial year 2019-01-01–2019-12-
31 and the proposed appropriations of the company’s profit or loss.
 OTHER INFORMATION 2019 AUDIT REPORT

We recommend to the general meeting of shareholders that the profit • has undertaken any action or been guilty of any omission which can
to be appropriated in accordance with the proposal in the statutory give rise to liability to the company, or
administration report and that the members of the Board of Directors and • in any other way has acted in contravention of the Companies Act, the
the President be discharged from liability for the financial year. Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations of the
Basis for Opinions
company’s profit or loss, and thereby our opinion about this, is to assess
We conducted the audit in accordance with generally accepted auditing
with reasonable degree of assurance whether the proposal is in accord-
standards in Sweden. Our responsibilities under those standards are fur-
ance with the Companies Act.
ther described in the Auditor’s Responsibilities section. We are independ-
Reasonable assurance is a high level of assurance, but is not a guaran-
ent of the parent company and the group in accordance with professional
tee that an audit conducted in accordance with generally accepted audit-
ethics for accountants in Sweden and have otherwise fulfilled our ethical
ing standards in Sweden will always detect actions or omissions that can
responsibilities in accordance with these requirements.
give rise to liability to the company, or that the proposed appropriations of
We believe that the audit evidence we have obtained is sufficient and
the company’s profit or loss are not in accordance with the Companies
appropriate to provide a basis for our opinions.
Act.
A further description of our responsibilities for the audit of the manage-
Responsibilities of the Board of Directors and the President
ment’s administration is located at the Swedish Inspectorate of Auditors
The Board of Directors is responsible for the proposal for appropriations of
website: www.revisorsinspektionen.se/rn/showdocument/documents/
the company’s profit or loss. At the proposal of a dividend, this includes an
rev_dok/revisors_ansvar.pdf. This description forms part of the auditor´s
assessment of whether the dividend is justifiable considering the require-
report.
ments which the company’s and the group’s type of operations, size and
risks place on the size of the parent company’s and the group’s equity,
The auditor´s opinion regarding the statutory sustainability report
consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the statutory sustainability
The Board of Directors is responsible for the company’s organization
report on pages 110–111 and that it is prepared in accordance with the
and the administration of the company’s affairs. This includes among
Annual Accounts Act.
other things continuous assessment of the company’s and the group’s
Our examination has been conducted in accordance with FAR:s audit-
financial situation and ensuring that the company’s organization is
ing standard RevR 12 The auditor´s opinion regarding the statutory sus-
designed so that the accounting, management of assets and the compa-
tainability report.
ny’s financial affairs otherwise are controlled in a reassuring manner. The
This means that our examination of the statutory sustainability report is
President shall manage the ongoing administration according to the
different and substantially less in scope than an audit conducted in
Board of Directors’ guidelines and instructions and among other matters
accordance with International Standards on Auditing and generally
take measures that are necessary to fulfill the company’s accounting in
accepted auditing standards in Sweden. We believe that the examination
accordance with law and handle the management of assets in a reassur-
has provided us with sufficient basis for our opinion.
ing manner.
A statutory sustainability report has been prepared.
Deloitte AB, was appointed auditor of AB Volvo by the general meeting
Auditor’s responsibility
of the shareholders on April 5, 2018 and has been the company’s auditor
Our objective concerning the audit of the administration, and thereby our
since April 5, 2018.
opinion about discharge from liability, is to obtain audit evidence to assess
with a reasonable degree of assurance whether any member of the Board
of Directors or the President in any material respect:

Göteborg, February 24, 2020

Deloitte AB

Jan Nilsson
Authorized Public Accountant

211
 OTHER INFORMATION 2019

KEY RATIOS
The Volvo Group uses key ratios in order to a ­ nalyze trends and perfor- EBITDA and EBITDA margin
mance within the Group. The key ratios are not defined by IFRS, unless Definition: EBITDA is the operating income before depreciation and
otherwise is stated, whereby definitions and reconciliations of significant amortization of tangible and intangible assets. The key figure EBITDA
key ratios are presented in the annual report. If the reconciliation is not margin is calculated as operating income adjusted with depreciation and
directly reflected in the financial statements, a separate reconciliation is amortization, in relation to net sales.
presented below.
Industrial Operations
Basic earnings per share (defined by IFRS) SEK M 2019 2018
Definition: Income for the period attributable to shareholders of AB Volvo
divided by the weighted average number of shares o ­ utstanding during the Net sales 418,361 378,320
period. For reconciliation see note 19 Equity and number of shares. Operating income 46,771 32,067
Amortization product and software development 2,629 2,704
Cash flow Amortization other intangible assets 283 284
Definition: The combined changes in the Group’s cash and cash equiva- Depreciation tangible assets 12,886 10,804
lents during the fiscal year. Changes in cash and cash equivalents are Total depreciation and amortization 15,797 13,791
specified with reference to changes in operating activities, changes in Operating income before depreciation and
investing activities, which add up to operating cash flow, as well as amortization (EBITDA) 62,568 45,858
changes in net investments and financing activities. For reconciliation see EBITDA margin, % 15.0 12.1
Consolidated cash flow statements.

Diluted earnings per share (defined by IFRS)

Definition: Diluted earnings per share is calculated as income for the
period attributable to the shareholders of AB Volvo divided by the average
number of shares outstanding plus the average number of shares that
would be issued as an effect of ongoing share-based incentive programs
and employee stock option programs. For reconciliation see note 19
Equity and number of shares.

Equity ratio
Definition: Total equity divided by total assets.

Industrial Operations Volvo Group

SEK M 2019 2018 2019 2018

Total equity 127,150 113,144 141,678 125,831

Total assets 384,517 354,351 524,837 474,663
Equity ratio, % 33.1 31.9 27.0 26.5

Gross margin Interest coverage

Definition: Gross income divided by net sales. Definition: Operating income plus interest income and similar credits
divided by interest expense and similar charges.
Industrial Operations Volvo Group
SEK M 2019 2018 2019 2018 Industrial Operations
SEK M 2019 2018
Net sales 418,361 378,320 431,980 390,834
Gross income 99,306 82,210 105,085 87,357 Operating income 46,771 32,067
Gross margin, % 23.7 21.7 24.3 22.4 Interest income and similar credits 320 199
Operating income and interest
income and similar credits 47,091 32,266

Interest expenses and similar charges –1,673 –1,658

Interest coverage, times 28.1 19.5

212
 OTHER INFORMATION 2019

Net capitalization of research and development cost Net financial position

Definition: Capitalized research and development cost reduced by amor- Definition: Cash and cash equivalents, marketable securities and interest-
tizations. bearing receivables reduced by short- and long-term interest-bearing
liabili­ties and provisions for post-employment benefits. For reconciliation
Volvo Group see table Net financial position, which is presented after the balance sheet
SEK M 2019 2018 for the Volvo Group.

Capitalization 3,526 3,367

Amortization –2,520 –2,576
Net capitalization of research
and development cost 1,006 791

Operating income, operating margin, adjusted operating income

and adjusted operating margin
Definition operating income: Operating income is profit before interest
and tax, also known as EBIT (Earnings before interest and tax) and is a
measure of profit from the ordinary business operations. For ­reconciliation
see the Income statements Volvo Group.
Definition operating margin: Operating income divided by net sales.
Definition adjusted operating income: Adjusted operating income is
profit before interest and tax as well as significant expenses or income of
a one-time character.
Definition adjusted operating margin: Adjusted operating income divided
by net sales.

Group
2019 functions
Construction Volvo & Other Industrial Financial Elimi­ Volvo
SEK M Quarter Trucks Equipment Buses Penta incl. elim operations Services nations Group

Net sales 276,647 88,606 31,019 13,287 8,802 418,361 14,870 –1,252 431,980

Operating income 31,552 11,910 1,337 1,876 97 46,771 2,766 –6 49,531

Capital gain on sale of shares in
WirelessCar 1 – – – – 1,466 1,466 – – 1,466
Capital gain on sale of shares in
WirelessCar 4 – – – – 156 156 – – 156
Year – – – – 1,621 1,621 – – 1,621
Adjusted operating income 31,552 11,910 1,337 1,876 –1,524 45,150 2,766 –6 47,910

Operating margin, % 11.4 13.4 4.3 14.1 – 11.2 – – 11.5

Adjusted operating margin, % 11.4 13.4 4.3 14.1 – 10.8 – – 11.1

Group
2018 functions
Construction Volvo & Other Industrial Financial Elimi­ Volvo
SEK M Quarter Trucks Equipment Buses Penta incl. elim operations Services nations Group

Net sales 250,358 84,238 25,826 13,741 4,157 378,320 13,070 –555 390,834

Operating income 19,541 12,125 575 2,341 –2,515 32,067 2,411 – 34,478
Capital gain on sale of shares in
Inner Mongolia North Hauler
Joint Stock Co., Ltd 2 – –818 – – – –818 – – –818
Provision for addressing the
issue with an emission control
component 4 6,810 – 190 – – 7,000 – – 7,000
Year 6,810 –818 190 – – 6,182 – – 6,182
Adjusted operating income 26,351 11,306 765 2,341 –2,514 38,249 2,411 – 40,660

Operating margin, % 7.8 14.4 2.2 17.0 – 8.5 – – 8.8

Adjusted operating margin, % 10.5 13.4 3.0 17.0 – 10.1 – – 10.4

213
 OTHER INFORMATION 2019

Penetration rate Return on operating capital

Definition: Share of unit sales financed by Financial Services in relation to Definition: Operating income divided by weighted average operating
total number units sold by the Volvo Group in markets where financial ­capital.
services are offered.
Industrial Operations
Financial Services SEK M 2019 2018
Number of units 2019 2018
Operating income 46,771 32,067
Number of financed units 62,209 58,698 Weighted average operating capital 89,383 82,209
Number of units sold where Return on operating capital,
financial services are offered 247,218 242,287 12 months rolling, % 52.3 39.0
Penetration rate, % 25 24

Return on total equity

Return on capital employed
Definition: Income for the period divided by weighted average total equity.
Definition: Operating income plus interest income and similar credits
divided by weighted average capital employed.
Volvo Group

Industrial Operations SEK M 2019 2018

SEK M 2019 2018 Income for the period 36,495 25,363

Weighted average total equity 135,122 119,021
Operating income, 12 months rolling 46,771 32,067
Interest income and similar credits, Return on total equity,
12 months rolling 320 199 12 months rolling, % 27.0 21.3
Operating income and interest income and
s­ imilar credits, 12 months rolling 47,091 32,266

Weighted average capital employed 166,084 144,189

Return on capital employed,
12 months rolling, % 28.4 22.4

Sales growth adjusted for currency and acquired and divested operations
Definition: Sales growth adjusted for currency and acquired and divested operations, divided by net sales for the prior year.

Industrial Operations Volvo Group

SEK M 2019 2018 2019 2018

Net sales 418,361 378,320 431,980 390,834

Increase/decrease of net sales for the year 40,042 56,519 41,146 58,096
Currency rates –20,911 11,199 –21,591 11,403
Acquired and divested units 0 –516 0 –516
Adjusted Increase/decrease of net sales for the year 19,131 45,836 19,555 47,208
Sales growth adjusted for currency and acquired and divested units, % 5.1 14.2 5.0 14.2

Self-financing ratio
Definition: Cash flow from operating activities divided by net investments in tangible assets, intangible assets and leasing vehicles as defined in the
Consolidated cash flow statement.

Industrial operations Volvo Group

SEK M 2019 2018 2019 2018

Cash flow from operating activities 48,996 36,351 39,047 31,187

Investment in in-/tangible assets and leasing vehicles, net 10,687 9,754 14,591 14,667
Self-financing ratio, % 458 373 268 213

214
 OTHER INFORMATION 2019

ELEVEN-YEAR SUMMARY
The reporting in the eleven-year summary is based on IFRS. Respective year is presented in accordance with the Generally
Accepted Accounting Practice (GAAP) for that year. Earlier years are not restated when new accounting standards are applied.

Consolidated income statement

SEK M 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Net sales 431,980 390,834 334,748 301,914 312,515 282,948 272,622 303,647 310,367 264,749 218,361
Cost of sales –326,895 –303,478 –254,581 –231,602 –240,653 –220,012 –212,504 –235,085 –235,104 –201,797 –186,167
Gross income 105,085 87,357 80,167 70,312 71,862 62,937 60,118 68,562 75,263 62,952 32,194

Research and development

expenses –18,539 –15,899 –16,098 –14,631 –15,368 –16,656 –15,124 –14,794 –13,276 –12,970 –13,193
Selling expenses –33,037 –30,890 –28,582 –26,867 –27,694 –27,448 –28,506 –28,248 –26,001 –24,149 –25,334
Administrative expenses –5,901 –5,798 –5,642 –5,121 –5,769 –5,408 –5,862 –5,669 –7,132 –5,666 –5,863
Other operating income
and expenses –221 –2,273 –1,061 –3,135 –4,179 –7,697 –3,554 –2,160 –1,649 –2,023 –4,798
Income from investments in
joint ventures and associated
­companies 1,859 1,948 1,407 156 –143 46 96 –23 –81 –86 –14
Income from other investments 285 33 135 112 4,609 50 –30 –47 –225 –58 –6
Operating income  49,531 34,478 30,327 20,826 23,318 5,824 7,138 17,622 26,899 18,000 –17,013

Interest income and

similar credits 320 199 164 240 257 328 381 510 608 442 390
Interest expenses
and similar charges –1,674 –1,658 –1,852 –1,847 –2,366 –1,994 –2,810 –2,476 –2,875 –3,142 –3,559
Other financial income
and expenses –1,345 –870 –385 11 –792 931 11 –301 297 213 –392
Income after financial items 46,832 32,148 28,254 19,230 20,418 5,089 4,721 15,355 24,929 15,514 –20,573

Income taxes –10,337 –6,785 –6,971 –6,008 –5,320 –2,854 –919 –4,097 –6,814 –4,302 5,889
Income for the period 36,495 25,363 21,283 13,223 15,099 2,235 3,802 11,258 18,115 11,212 –14,685

Attributable to:    
Owners of AB Volvo 35,861 24,897 20,981 13,147 15,058 2,099 3,583 11,039 17,751 10,866 –14,718
Non-controlling interest 635 466 302 75 41 136 219 219 364 346 33
  36,495 25,363 21,283 13,223 15,099 2,235 3,802 11,258 18,115 11,212 –14,685

Consolidated income statement Industrial Operations

SEK M 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Net sales 418,361 378,320 323,809 291,459 303,582 275,999 265,420 296,031 303,589 257,375 208,487
Cost of sales –319,055 –296,109 –248,382 –225,797 –236,311 –217,251 –209,307 –231,216 –233,097 –197,480 –179,578
Gross income 99,306 82,210 75,428 65,662 67,271 58,748 56,113 64,815 70,492 59,895 28,909

Research and
development expenses –18,539 –15,899 –16,098 –14,631 –15,368 –16,656 –15,124 –14,794 –13,276 –12,970 –13,193
Selling expenses –30,483 –28,642 –26,495 –24,946 –25,857 –25,778 –26,904 –26,582 –25,181 –22,649 –23,752
Administrative expenses –5,887 –5,756 –5,602 –5,081 –5,728 –5,367 –5,824 –5,639 –4,753 –5,640 –5,838
Other operating income
and expenses 230 –1,828 –640 –2,531 –3,473 –6,931 –2,710 –1,600 –1,045 –659 –2,432
Income/loss from investments
in joint ventures and
associated companies 1,859 1,948 1,407 156 –143 46 96 –23 –82 –86 –15
Income from other
investments 285 33 135 112 4,610 49 –31 –46 –225 –57 –13
Operating income 46,771 32,067 28,135 18,740 21,312 4,111 5,616 16,130 25,930 17,834 –16,333

215
 OTHER INFORMATION 2019

Consolidated balance sheets

SEK M 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Intangible assets 36,668 38,104 35,893 37,916 36,416  37,115 36,588  40,373 39,507 40,714 41,628
Property, plant and equipment 53,496 55,673 53,348 55,875 53,618  55,181 52,233  55,004 54,540 54,242 55,280
Assets under operating leases 43,326 43,103 37,166 34,693 32,531  31,218 25,672  29,022 23,922 19,647 20,388
Shares and participations 13,113 11,875 11,225 12,420 12,050  9,839 6,327 2,890 1,874 2,098 2,044
Inventories 56,644 65,783 52,701 48,287 44,390  45,533 41,153 40,409 44,599 39,837 37,727
Customer-financing receivables 142,982 126,927 109,378 110,821 102,583  99,166 83,861 80,989 78,699 72,688 81,977
Interest-bearing receivables 2,743 3,393 3,501 2,393 2,938  2,555 1,389 5,635 3,638 2,757 3,044
Other receivables 81,432 82,509 72,961 70,814 61,932 68,448 59,943 55,531 59,877 53,154 50,575
Cash and cash equivalents 61,660 47,093 36,270 25,172 24,393  33,554 29,559 28,889 37,241 32,733 37,910
Assets held for sale 32,773 203 51 525 3,314  288 8,104 – 9,348 136 1,692
Assets 524,837 474,663 412,494 398,916 374,165 382,896 344,829  338,742 353,244 318,007 332,265

Total equity1 141,678 125,831 109,011 97,764 85,610  80,048 77,365  86,914 85,681 74,121 67,034
Provision for post-employment
­benefits 19,988 16,482 14,476 14,669 13,673  16,683 12,322 6,697 6,665 7,510 8,051
Other provisions 30,835 32,165 25,477 26,408 27,207 28,010 19,900 21,787 20,815 18,992 19,485
Interest-bearing liabilities 157,752 135,857 127,676 141,048 132,607  147,985 135,001 131,842 130,479 123,695 156,852
Other liabilities 164,171 164,328 135,854 118,879 114,495 110,042 99,891 91,502 104,888 93,554 80,571
Liabilities held for sale 10,413 – – 148 573  130 350 – 4,716 135 272
Total equity
and liabilities 524,837 474,663 412,494 398,916 374,165 382,896 344,829  338,742 353,244 318,007 332,265
1
of which non-controlling
interests 3,083 2,452 1,941 1,703 1,801  1,723 1,333 1,266 1,100 1,011 629
Assets pledged 21,220 15,988 12,791 10,592 9,428 7,680  5,078 4,099 1,832 3,339 958
Contingent liabilities 13,732 14,247 15,242 16,056 15,580 15,940  17,290 17,763 17,154 11,003 9,607

216
 OTHER INFORMATION 2019

Consolidated balance sheets, Industrial Operations

SEK M 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Intangible assets 36,467 37,889 35,716 37,768 36,314 37,010 36,479  40,267 39,385 40,613 41,532
Property, plant and equipment 53,411 55,631 53,308 55,812 53,554 55,087 52,146  54,899 54,446 54,169 55,208
Assets under operating leases 33,794 32,700 24,051 22,752 20,616 19,484 17,013  21,263 16,749 13,217 13,539
Shares and participations 13,095 11,866 11,215 12,409 12,042 9,825 6,321  2,884 1,871 2,080 2,025
Inventories 56,080 65,366 52,231 48,080 44,194 45,364 40,964  40,057 43,828 38,956 35,765
Customer-financing receivables 1,570 1,560 1,358 1,698 11 1,828 1,406  1,397 1,702 1,428 1,367
Interest-bearing receivables 4,916 3,882 4,966 4,415 3,738 2,777 2,195  11,011 6,734 11,153 8,010
Other receivables 99,082 101,347 85,822 75,759 68,223 70,413 60,679  54,324 59,062 52,358 49,008
Cash and cash equivalents 57,675 43,907 32,447 20,875 21,210 31,105 28,230  27,146 35,951 31,491 37,404
Assets held for sale 28,427 203 51 525 3,314 288 8,104  – 9,348 136 1,692
Assets 384,517 354,351 301,165 280,093 263,216 273,181 253,537  253,248 269,076 245,602 245,550

Total equity 127,150 113,144 97,790 86,579 75,151 70,105 68,467 78,321 76,682 66,101 58,485
Provision for post-employment
­benefits 19,850 16,374 14,391 14,608 13,621 16,580 12,249 6,663 6,635 7,478 8,021
Other provisions 27,055 28,476 22,680 22,545 23,936 25,054 17,575 19,653 19,101 17,240 17,456
Interest-bearing liabilities 32,326 25,328 27,001 33,944 32,562 48,180 52,491 54,472 55,394 59,857 78,890
Other liabilities 172,209 171,029 139,303 122,269 117,374 113,131 102,405 94,139 106,548 94,791 82,426
Liabilities held for sale 5,927 – – 148 573 130 350 – 4,716 135 272
Total equity
and liabilities 384,517 354,351 301,165 280,093 263,216  273,181 253,537  253,248 269,076 245,602 245,550

217
 OTHER INFORMATION 2019

Consolidated cash flow statements

SEK bn 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Operating income 49.5 34.5 30.3 20.8 23.3  5.8 7.1 17.6 26.9 18.0 –17.0
Depreciation and amortization 20.6 18.4 16.9 16.7 16.8  15.9 17.4 14.7 13.9 13.8 15.2
Other non-cash items –2.8 9.7 1.4 –0.4 –0.5  6.1 2.4 1.4 1.3 1.6 4.4
Change in working capital –18.2 –23.7 –4.7 –13.9 –9.0  –14.1 –10.8 –21.9 –15.1 4.8 16.9
Financial items and income tax –10.1 –7.7 –6.3 –5.7 –4.6  –5.0 –5.1 –8.0 –7.3 –5.5 –4.6
Cash flow from operating activities 39.0 31.2 37.6 17.5 25.9  8.7 11.0 3.8 19.7 32.7 14.9

Investments in in-/tangible assets –12.0 –10.7 –7.7 –9.5 –8.8  –8.6 –12.2 –14.6 –12.6 –10.4 –10.5
Investments in leasing assets –10.0 –10.1 –11.5 –10.8 –10.5  –10.1 –8.2 –10.0 –7.4 –4.8 –4.2
Disposals of in-/tangible assets and leasing
assets 7.4 6.2 5.4 9.0 6.0  5.0 3.4 3.1 3.3 3.1 3.8
Investments and divestments of shares, net 0.1 1.0 2.2 0.2 –2.0  0.1 0.0 –1.2 –0.1 –0.1 0.0
Acquired and divested operations, net 1.3 –0.2 0.9 1.4 0.4  7.4 0.9 3.4 –1.6 0.6 0.2
Interest-bearing receivables including
­marketable securities –1.0 0.1 1.6 2.5 3.6  –4.8 0.5 3.7 2.6 6.8 –8.9
Cash flow after net investments 24.9 17.4 28.5 10.4 14.5  –2.3 –4.6 –11.8 3.9 27.9 –4.7

Change in loans, net 9.3 1.9 –9.0 –2.2 –13.2  6.7 13.0 14.1 8.7 –25.7 12.6
Repurchase of own shares – – – – –  – – – – – 0.0
Dividend to AB Volvo’s shareholders –20.3 –8.6 –6.6 –6.1 –6.1  –6.1 –6.1 –6.1 –5.1 0.0 –4.1
Dividend to non-controlling interests –0.0 0.0 0.0 –0.2 0.0 0.0 –0.2 0.0 0.0 –0.1 –
Other 0.2 0.0 0.0 0.0 0.0  –0.1 0.1 0.0 0.0 0.0 –0.1
Change in cash and cash equivalents
excluding translation differences 14.0 10.7 12.8 1.9 –4.8  –1.8 2.2 –3.8 7.5 2.1 3.7

Translation differences on cash and

cash equivalents 0.5 0.1 –0.7 1.0 –0.4  1.1 –0.5 –0.8 –0.1 –0.4 –0.2
Change in cash and
cash equivalents 14.5 10.8 12.1 2.9 –5.2  –0.7 1.7 –4.6 7.4 1.7 3.5

Operating cash flow Industrial Operations

SEK bn 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Operating income 46.8 32.1 28.1 18.7 21.3 4.1 5.6 16.1 26.0 17.8 –16.3
Depreciation and amortization 15.8 13.8 12.6 12.6 12.6 12.7 14.5 12.0 11.4 11.4 12.4
Other non-cash items –3.6 8.9 0.9 –1.1 –1.1 5.3 1.5 0.8 0.6 0.1 2.3
Change in working capital –0.5 –11.0 –0.2 –14.7 –1.9 –3.3 –2.0 –9.2 –4.2 4.6 4.7
Financial items and income taxes –9.5 –7.5 –5.6 –5.6 –4.0 –4.5 –4.9 –7.3 –6.9 –5.1 –4.7
Cash flow from operating activities 49.0 36.4 35.8 9.9 26.7 14.3 14.7 12.4 26.9 28.8 –1.6

Investments in in-/tangible assets –11.9 –10.7 –7.7 –9.4 –8.8 –8.6 –12.2 –14.6 –12.6 –10.3 –10.3
Investments in leasing assets –0.1 –0.0 –0.1 –0.1 –0.3 –0.5 –1.5 –3.6 –1.4 –0.3 –0.2
Disposals of in-/tangible assets and leasing
assets 1.4 0.9 0.4 3.2 0.7  1.1 0.5 0.9 1.2 0.8 0.7
Operating cash flow 38.3 26.6 28.4 3.5 18.3  6.4 1.5 –4.9 14.1 19.0 –11.4

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 OTHER INFORMATION 2019

Exports from Sweden

SEK M 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Volvo Group, total 118,543 117,887 107,958 91,962 86,731 78,174 88,560 84,314 91,065 72,688 41,829

Key ratios
2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Gross margin, % 1
23.7 21.7 23.3 22.5 22.2 21.3 21.1 21.9 23.7 23.3 13.9
Research and development expenses
as percentage of net sales1 4.4 4.2 5.0 5.0 5.1 6.0 5.7 5.0 4.4 5.0 6.3
Selling expenses as percentage
of net sales1 7.3 7.6 8.2 8.6 8.5 9.3 10.1 9.0 8.0 8.8 11.4
Administration expenses as
percentage of net sales1 1.4 1.5 1.7 1.7 1.9 1.9 2.2 1.9 2.3 2.2 2.8
Operating income before depreciation
and amortization (EBITDA), SEK M1 62,568 45,858 40,732 31,373 33,886 16,784 20,089 28,117 37,376 29,171 –3,951
EBITDA margin, %1 15.0 12.1 12.6 10.8 11.2 6.1 7.6 9.5 12.3 11.3 –1.9
Net capitalization of research and
development, SEK M 1,006 791 –876 90 –550 –1,441 787 2,264 1,197 223 –
Return on capital employed in Industrial
Operations, % 28.4 22.4 – – – – – – – – –
Return on operating capital in Industrial
Operations, % 52.3 39.0 32.5 21.5 25.0 4.5 5.9 16.5 28.8 19.5 –15.6
Return on total equity, % 27.0 21.3 20.8 14.9 18.4 2.8 5.0 12.9 23.1 16.0 –19.7
Interest coverage, times1 28.1 19.5 15.3 10.3 9.1 2.2 2.1 6.7 9.6 5.9 –4.7
Self-financing ratio, % 268 213 272 155 194 64 84 18 118 270 137
Self-financing ratio Industrial
Operations, % 458 373 483 155 316 180 112 72 210 294 –16
Net Financial position excl. post­-
employment benefits and lease
liabilities SEK M1 62,596 43,926 26,339 –1,151 349 –9,924 –19,828 –19,023 –14,974 –18,849 –35,506
Net financial position excl. post-­
employment benefits and lease
liabilities as percentage of total equity1 49.2 38.8 26.9 –1.3 0.5 –14.2 –29.0 –24.3 –19.5 –28.5 –60.7
Net Financial position incl. post­-
employment benefits and lease
liabilities SEK M1 37,267 29,101 12,200 –15,679 –13,237 –26,378 –32,066 –22,978 –19,346 –24,691 –41,489
Net financial position incl. post-­
employment benefits and lease
liabilities as percentage of total equity1 29.3 25.7 12.5 –18.1 –17.6 –37.6 –46.8 –29.3 –25.2 –37.4 –70.9
Equity ratio 27.0 26.5 26.4 24.5 22.9 20.9 22.4 25.7 24.3 23.3 20.2
Equity ratio, Industrial Operations 33.1 31.9 32.5 30.9 28.6 25.7 27.0 30.9 28.5 26.9 23.8
Equity ratio excluding ­non-controlling
­interest 26.4 26.0 26.0 24.1 22.4 20.5 22.0 25.2 23.9 23.0 20.0

1 Pertains to the Industrial Operations.

219
 OTHER INFORMATION 2019

Volvo share statistics

Data per share

(adjusted for issues and splits)1 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Basic earnings, SEK1 17.64 12.25 10.08 6.47 7.42 1.03 1.77 5.44 8.75 5.36 –7.26
Cash dividend, SEK 13.009 10.008 4.25 3.25 3.00 3.00 3.00 3.00 3.00 2.50 0
Share price at year end (B share), SEK 156.90 115.95 152.70 106.40 79.10 84.70 84.45 88.80 75.30 118.50 61.45
Dividend yield (B share), %2 8.3 8.6 2.8 3.1 3.8 3.5 3.6 3.4 4.0 2.1 –
Effective return (B share), %3 47 –21 48 39 –3 4 –2 22 –34 97 43
Price/earnings ratio (B share)4 8.9 9.5 14.8 16.4 10.7 82.2 47.7 16.3 8.6 22.1 neg
EBIT multiple5 6.1 6.5 9.9 11.7 7.7 26.3 19.6 9.0 5.1 12.0 neg
Payout ratio, %6 74 82 41 50 40 291 169 55 34 47 –
Total equity, SEK 7 66 61 52 47 41 39 38 43 42 36 33
Return on total equity, % 27.0 21.3 20.5 14.9 18.4 2.8 5.0 12.9 23.1 16.0 neg

1 Basic earnings per share is calculated as income for the period divided
by average number of shares outstanding.
2  Proposed dividend in SEK per share divided by share price at year end.
3 Share price at year end, including proposed dividend during the year,
divided by share price at beginning of the year.
4 Share price at year end divided by basic earnings per share.
5 Market value at year end less net financial position and non-controlling
interests divided by operating income.
6 Cash dividend divided by basic earnings per share.
7 Total equity for shareholders in AB Volvo divided by number of shares
outstanding at year end.
8 S EK 5.00 per share in ordinary dividend and SEK 5.00 per share in extra
dividend.
9 P roposed by the Board of Directors. SEK 5.50 per share in ordinary
dividend and SEK 7.50 per share in extra dividend.

Other share data

2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Number of shareholders at year end 250,798 245,663 240,521 237,654 234,989 237,871  246,265 242,482 251,715 240,043 233,311
Number of Series A shares
outstanding at year end, million 456 457 459 472 485 492  499 526 643 657 657
Number of Series B shares
outstanding at year end, million 1,577 1,576 1,573 1,560 1,546 1,537  1,530 1,502 1,385 1,371 1,371
Average number of shares
outstanding, million 2,033 2,032 2,032 2,031 2,030 2,028  2,028 2,028 2,027 2,027 2,027
Number of Series A shares traded
in Stockholm during the year, million 43.8 51.8 46.7 67.2 51.7 86.3 53.0 45.4 130.5 203.2 147.0
Number of Series B shares traded
in Stockholm during the year, million 1,146.1 1,293.8 1,341.3 1,667.9 2,052.1 2,068.7  1,878.5 2,081.2 2,944.1 2,272.4 2,713.9

The largest shareholders in Number % of Share of Distribution of shares, Number of % of Share of

AB Volvo, December 31, 20191 of shares total votes capital, % December 31, 20191 shareholders total votes1 capital, %1

Industrivärden 158,200,000 25.2 7.8 1–1,000 shares 202,828 2.7 2.5

Geely Holding 167,247,516 15.7 8.2 1,001–10,000 shares 43,814 5.3 5.7
AMF Insurance & Funds 19,327,820 3.1 1.0 10,001–100,000 shares 3,539 3.1 4.1
Alecta 33,417,021 4.1 1.6 100,001– 616 88.9 87.7
Norges Bank Investment Total 250,798 100.0 100.0
Management 70,499,021 5.3 3.5
SHB 90,381,010 5.0 4.4 1 Based on all registered shares.
AFA Insurance 22,742,355 2.9 1.1
AB Volvo held 4.5% of the Company’s shares on December 31, 2019.
Swedbank Robur Funds 101,944,149 1.7 5.0
AP4 Fund 100,164,485 2.0 4.9
BlackRock 18,790,793 1.8 0.9
Total 728,714,170 66.9 38.5

1 Based on the number of outstanding shares.

220
 OTHER INFORMATION 2019

Business area statistics

Net sales1
SEK M 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Trucks Europe 112,125 111,237 99,642 91,468 83,767 72,757 73,640 76,365 83,451 69,606 65,874
  North America 85,731 70,233 52,405 51,849 73,017  53,696 40,314 42,650 37,042 26,901 21,563
  South America 23,753 16,021 12,789 10,613 11,624  19,669 23,318 21,172 26,847 21,680 12,490
  Asia 37,610 36,664 36,998 33,464 31,589  29,264 26,740 36,531 37,840 35,231 26,943
  Africa and Oceania 17,427 16,203 14,646 13,256 13,982  15,518 14,462 15,565 13,741 13,887 12,069
  Total 276,647 250,358 216,480 200,650 213,978  190,904 178,474 192,283 198,920 167,305 138,940

Construction Europe 30,300 27,291 22,977 19,739 17,732  17,215 16,356 16,518 17,765 16,138 12,987
Equipment  North America 17,404 15,575 12,234 10,724 11,843  10,784 8,319 12,027 7,829 6,267 5,475
  South America 2,532 2,304 1,760 1,414 2,207  3,234 3,314 3,788 4,163 4,130 2,578
  Asia 33,932 33,781 25,058 15,765 16,424  18,458 21,911 27,033 29,999 24,352 12,957
  Africa and Oceania 4,437 5,287 4,468 3,088 2,802  3,164 3,539 4,192 3,745 2,923 1,661
  Total 88,606 84,238 66,497 50,731 51,008  52,855 53,437 63,558 63,500 53,810 35,658

Buses Europe 7,369 7,036 7,753 7,861 7,284  6,139 5,429 6,200 6,631 6,242 7,707
  North America 15,543 13,244 12,512 11,345 10,635  6,721 5,929 6,675 7,532 7,200 5,673
  South America 3,281 1,393 1,148 1,363 1,425  2,559 1,836 2,794 2,715 1,737 1,235
  Asia 2,617 2,094 3,135 3,067 2,557  1,892 2,055 2,853 2,953 3,299 2,749
Africa and Oceania 2,209 2,060 1,530 1,749 1,678  1,334 1,457 1,774 1,992 2,038 1,101
  Total 31,019 25,826 26,078 25,386 23,580  18,645 16,707 20,295 21,823 20,516 18,465

Volvo Penta Europe 6,671 7,487 5,727 4,973 4,462  3,779 3,714 3,620 4,274 4,507 4,390
  North America 3,180 2,912 2,456 2,191 2,161  1,584 1,491 1,486 1,379 1,500 1,100
  South America 319 299 289 291 365  386 297 306 335 335 284
  Asia 2,439 2,443 2,082 1,891 1,855  1,615 1,692 1,867 2,130 2,008 2,054
  Africa and Oceania 679 599 566 546 562  425 356 352 341 366 331
  Total 13,287 13,741 11,119 9,893 9,406  7,790 7,550 7,631 8,458 8,716 8,159

Volvo Aero Europe – – – – – – – 2,404 2,893 3,768 3,942

North America – – – – – – – 2,657 3,300 3,599 3,508
  South America – – – – – – – 0 7 27 34
  Asia – – – – – – – 109 104 233 205
Africa and Oceania – – – – – – – 49 52 81 114
  Total – – – – – – – 5,219 6,356 7,708 7,803
Other and
  eliminations 8,802 4,157 3,635 4,799 5,610  5,806 9,252 7,044 4,532 –680 –538
Net sales Industrial
Operations 418,361 378,320 323,809 291,459 303,582 275,999 265,420 296,031 303,589 257,375 208,487

Financial Europe 6,279 6,063 5,431 5,116 5,278  5,120 4,686 4,703 4,663 4,733 7,127
Services North America 5,534 4,600 4,234 4,202 4,033  2,999 2,900 2,833 2,326 2,605 3,004
  South America 1,555 1,276 1,368 1,235 1,116  1,122 1,009 1,195 1,131 1,156 1,070
  Asia 1,010 800 543 476 548  638 707 795 571 435 435
  Africa and Oceania 492 332 235 213 224  232 237 257 192 101 75
  Total 14,870 13,070 11,812 11,242 11,199  10,111 9,539 9,783 8,883 9,031 11,711
  Eliminations –1,252 –555 –873 –787 –2,265  –3,162 –2,336 –2,167 –2,104 –1,658 –1,836
Volvo Group total 431,980 390,834 334,748 301,914 312,515 282,948 272,622 303,647 310,367 264,749 218,361

Of which:
Vehicles2 332,558 299,356 252,063 223,996 237,430
Services 85,804 78,963 71,747 67,463 66,152
Financial Services 14,870 13,070 11,812 11,242 11,199
Eliminations –1,252 –555 –873 –787 –2,265

1 Volvo Aero was divested in October 1, 2012.

2 Including construction equipment and Volvo Penta engines.

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 OTHER INFORMATION 2019

Operating income1
SEK M 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Trucks 31,552 19,541 20,383 15,020 19,517 4,157 6,145  10,216 18,227 10,112 –10,805
Construction Equipment 11,910 12,125 7,917 2,246 2,044 652 2,592  5,773 6,812 6,180 –4,005
Buses 1,337 575 928 911 860 92 –190 51 1,114 780 –350
Volvo Penta 1,876 2,341 1,439 1,269 1,086 724 626  541 825 578 –230
Volvo Aero – – – – – – –  767 360 286 50
Financial Services 2,766 2,411 2,192 2,086 2,006 1,712 1,522  1,492 969 167 –680
Other 91 –2,515 –2,532 –707 –2,195 –1,514 –3,557 –1,217 –1,408 –102 –994
Operating income/loss
Volvo Group 49,531 34,478 30,327 20,826 23,318 5,824 7,138  17,622 26,899 18,000 –17,013

1B
 etween 2009 and 2011, the benefits from the synergies created in the business units are transferred back to the various business areas. Operating income in
2014 included expected credit losses of 660. See section for Key ratios regarding adjusted items.

Operating margin
% 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Trucks 11.4 7.8 9.4 7.5 9.1 2.2 3.4 5.3 9.2 6.0 –7.8
Construction Equipment 13.4 14.4 11.9 4.4 4.0 1.2 4.9 9.1 10.7 11.5 –11.2
Buses 4.3 2.2 3.6 3.6 3.6 0.5 –1.1 0.3 5.1 3.8 –1.9
Volvo Penta 14.1 17.0 12.9 12.8 11.5 9.3 8.3 7.1 9.8 6.6 –2.8
Volvo Aero – – – – – – – 14.7 5.7 3.7 0.6
Volvo Group Industrial
­Operations 11.2 8.5 8.7 6.4 7.0 1.5 2.1 5.4 8.5 6.9 –7.8

Financial Services 18.6 18.4 18.6 18.6 17.9 16.9 16.0 15.3 10.9 1.8 –5.8
Volvo Group 11.5 8.8 9.1 6.9 7.5 2.1 2.6 5.8 8.7 6.8 –7.8

Regular employees at year-end

Number 1 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Trucks 59,142 58,891 55,026 52,154 54,668  58,067 58,542 61,256 62,315 57,796 56,505
Construction Equipment 13,756 13,419 12,788 13,397 13,889  14,901 14,663 14,788 18,422 16,648 16,126
Buses 8,324 8,178 7,943 7,353 7,270  6,900 6,648 7,514 8,529 8,685 9,541
Volvo Penta 1,800 1,713 1,622 1,530 1,470  1,422 1,412 1,361 2,549 2,353 2,928
Volvo Aero – – – – – – – – 3,179 3,120 3,278
Financial Services 1,538 1,401 1,363 1,328 1,340  1,339 1,355 1,362 1,323 1,235 1,234
Other 8,015 8,527 8,362 8,277 9,827  10,193 12,913 12,436 1,845 572 596
Volvo Group, total 92,575 92,129 87,104 84,039 88,464  92,822 95,533 98,717 98,162 90,409 90,208

1 As of 2012, employees in business units are not allocated to the business areas.

Environmental performance of Volvo production plants, Industrial operations

More detailed information, method for data collection and management approach are further described in Sustainability Notes, which will be
made available on volvogroup.com/GRI19
Absolute values and related to net sales 2019 2018 2017 2016

Energy usage (GWh; MWh/SEK M)2 2,118; 5.1 2,196; 5.8 2,068; 6.4 2,076; 7.1
Direct CO2 emissions, scope 1 (1,000 tons; tons/SEK M)2 211; 0.5 223; 0.6 207; 0.6 211; 0.7
Indirect CO2 emissions, scope 2 (1,000 tons; tons/SEK M)2 113; 0.3 198; 0.5 192; 0.6 196; 0.7
Water consumption (1,000 m3; m3/SEK M) 5,706; 13.6 4,870; 12.9 4,817; 14.9 4,430; 15.2
NOX emissions (tons; kilos/SEK M) 311; 0.7 360; 1.0 301; 0.9 333; 1.1
Solvent emissions (tons; kilos/SEK M) 1,488; 3.6 2,148; 5.7 1,681; 5.2 1,792; 6.1
Sulphur dioxide ­emissions (tons; kilos/SEK M) 9.6; 0.02 13.6; 0.04 13.3; 0.04 12.9; 0.04
Hazardous waste (tons; kilos/SEK M) 51,024; 122.0 38,601; 102.0 31,941; 98.6 27,649; 94.9
Net sales, (SEK bn) 418.4 378.3 323.8 291.5

1 Restated according to new standards.

2 From 2012 revised system boundaries and emission factors.

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 OTHER INFORMATION 2019

Regular employees at year-end

Number 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Sweden 21,094 20,887 19,965 19,235 20,412  21,384 22,588 23,052 24,663 23,073 22,763
Europe, excluding Sweden 29,033 28,807 27,596 26,955 27,662  29,449 29,746 30,382 30,458 29,239 29,793
North America 17,750 17,845 15,882 14,245 15,534  15,217 16,397 16,569 15,427 12,844 12,640
South America 5,466 5,228 4,774 4,762 5,380  6,353 6,275 5,977 5,234 4,322 4,257
Asia 16,863 16,888 16,526 16,469 17,046  17,793 17,953 20,222 19,924 18,535 18,416
Africa and Oceania 2,369 2,474 2,361 2,373 2,430  2,626 2,574 2,515 2,456 2,396 2,339
Volvo Group total 92,575 92,129 87,104 84,039 88,464 92,822 95,533 98,717 98,162 90,409 90,208

Delivered units
Number 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Heavy-duty trucks (>16 tons) 201,092 193,886 171,963 158,025 176,589 173,650 170,307 172,798 179,779 123,522 82,675
Medium-duty trucks (7–16 tons) 12,700 14,065 14,331 15,691 14,749 15,114 16,779 32,935 34,631 30,657 21,653
Light trucks (<7 tons) 18,977 18,539 16,108 16,708 16,137 14,360 13,188 18,284 23,982 25,811 23,354
Total trucks 232,769 226,490 202,402 190,424 207,475 203,124 200,274 224,017 238,391 179,989 127,681

Number 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Trucks Europe 104,145 110,349 105,432 97,909 86,448 72,458 82,088 84,355 95,113 65,503 49,145
  North America 62,308 53,877 37,941 39,193 64,507 57,714 44,755 47,806 42,613 24,282 17,574
  South America 23,729 16,146 11,073 9,442 11,069 23,741 29,137 23,443 29,274 21,483 12,587
  Asia 29,435 32,276 35,476 31,502 31,979 32,399 28,692 51,514 56,165 53,833 34,800
  Africa and Oceania 13,152 13,842 12,480 12,378 13,472 16,812 15,602 16,899 15,226 14,888 13,575
  Total 232,769 226,490 202,402 190,424 207,475 203,124 200,274 224,017 238,391 179,989 127,681

Construction Europe 21,420 19,567 17,519 14,700 12,539 14,174 13,522 12,545
Equipment North America 7,278 7,218 5,685 5,105 5,710 7,127 5,240 6,782
  South America 2,004 2,023 1,372 1,175 2,036 3,669 3,568 3,908
  Asia 53,664 50,716 36,254 21,072 22,339 33,648 44,892 49,263
  Africa and Oceania 2,519 3,130 3,297 2,254 2,094 2,699 3,564 2,982
  Total 86,885 82,654 64,127 44,306 44,718 61,317 70,786 75,480

Buses Europe 2,350 2,142 2,645 2,676 2,431 2,221 2,146 2,491 2,695 2,395 3,164
  North America 3,084 2,796 2,973 2,659 2,398 1,590 1,752 1,826 3,014 2,092 1,539
  South America 1,917 973 784 1,149 1,415 2,985 2,434 2,560 2,620 1,174 690
  Asia 1,465 1,451 2,186 1,849 1,656 1,242 1,822 2,945 3,417 3,477 3,839
  Africa and Oceania 915 1,064 805 1,220 925 721 756 856 1,040 1,091 625
  Total 9,731 8,426 9,393 9,553 8,825 8,759 8,910 10,678 12,786 10,229 9,857

2015 2014 2013 20121 2011 2010 2009

2,077; 6.8 2,168; 7.9 2,320; 8.7 2,483; 8.5 2,471; 8.1 2,315; 9.0 1,888; 9.1
220; 0.7 231; 0.8 255; 1.0 273; 0.9 255; 0.8 279; 1.1 213; 1.0
192; 0.6 218; 0.8 243; 0.9 260; 0.9
4,919; 16.2 4,982; 18.1 5,815; 21.9 7,372; 25.2 7,970; 26.2 7,519; 29.2 6,637; 31.8
344; 1.3 332; 1.2 347; 1.3 413; 1.4 474; 1.6 719; 2.8 322; 1.5
1,885; 6.2 2,472; 9.0 2,221; 8.4 2,358; 8.1 2,554; 8.4 2,294; 8.9 1,435; 6.9
32.1; 0.1 37.9; 0.1 23.4; 0.1 26; 0.1 34; 0.1 33; 0.1 38; 0.2
27,824; 91.6 24,944; 90.4 28,395; 107.0 32,547; 111.4 25,943; 85.5 22,730; 88 17,558; 84
303.6 276.0 265.4 292.2 303.6 257.4 208.5

223
 OTHER INFORMATION 2019 GRI INDEX

GRI CONTENT INDEX

The sustainability disclosures of the Volvo Group 2019 are found in two This GRI content index includes references to the Annual and Sustainability
main documents. We call them ASR and GRI. Report (ASR) and page number or to the document GRI 2019.

ASR – the integrated part of the report
In this integrated report, sustainability and responsible business behavior
are part of the Volvo Group’s overall strategy and business model. The
Annual and Sustainability Report is prepared in such a way that sustaina-
bility disclosures are found throughout this document in the section cov-
ering the context of how it is managed. This report also makes up the
statutory sustainability report.
Omissions are market with an asterisk and a code for the omission:
*C = Competitively sensitive information
*D = Lack of data or information
In the case where omissions need to be further explained, this is done in
the GRI Report where more space is available.

GRI 2019 – Consolidated disclosures and more details

In addition, Sustainability Notes have been prepared to consolidate sus-
tainability information, report more detailed data, additional information
on management approach and general disclosures. These Sustainability
Notes, which referred to as a GRI Report have been prepared in accord-
ance with the GRI Standards ‘Core’ option and will be made available
after the publication of this report on volvogroup.com/GRI19.

GRI INDEX

Document, page Omission/

GENERAL DISCLOSURES number Comment
ORGANIZATIONAL PROFILE
102-1 Name of the organization ASR back cover, GRI 2019
102-2 Activities, brands, products, and services ASR 1–3, 84–94, GRI 2019
102-3 Location of headquarters ASR back cover, GRI 2019
102-4 Location of operations ASR 59, GRI 2019
102-5 Ownership and legal form ASR 99, GRI 2019
102-6 Markets served ASR 3, 129, GRI 2019
102-7 Scale of the organization GRI 2019
102-8 Information on employees and other workers GRI 2019
102-9 Supply chain ASR 54–55, GRI 2019
102-10 Significant changes to the organization and its supply chain GRI 2019
102-11 Precautionary Principle or approach GRI 2019
102-12 External initiatives ASR 33, GRI 2019
102-13 Membership of associations GRI 2019
STRATEGY
102-14 Statement from senior decision-maker ASR 6–7, GRI 2019
102-15 Key impacts, risks, and opportunities ASR 102–111, GRI 2019
ETHICS AND INTEGRIT Y
102-16 Values, principles, standards, and norms of behavior ASR 40, GRI 2019
102-17 Mechanisms for advice and concerns about ethics ASR 40, GRI 2019
GOVERNANCE
102-18 Governance structure ASR 188–207, GRI 2019
STAKEHOLDER ENGAGEMENT
102-40 List of stakeholder groups GRI 2019
102-41 Collective bargaining agreements ASR 68, GRI 2019

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 OTHER INFORMATION 2019 GRI INDEX

102-42 Identifying and selecting stakeholders GRI 2019

102-43 Approach to stakeholder engagement GRI 2019
102-44 Key topics and concerns raised GRI 2019
REPORTING PRACTICE
102-45 Entities included in the consolidated financial statements ASR 184, GRI 2019
102-46 Defining report content and topic Boundaries GRI 2019
102-47 List of material topics GRI 2019
102-48 Restatements of information GRI 2019
102-49 Changes in reporting GRI 2019
102-50 Reporting period GRI 2019
102-51 Date of most recent report GRI 2019
102-52 Reporting cycle GRI 2019
102-53 Contact point for questions regarding the report ASR 227, GRI 2019
102-54 Claims of reporting in accordance with the GRI Standards GRI 2019
102-55 GRI content index ASR 224–226, GRI 2019
102-56 External assurance ASR 211, GRI 2019
Document, page Omission/
SPECIFIC DISCLOSURES reference comment
ECONOMIC CATEGORIES
Standard: Economic performance 2016
103-1,2,3 Management approach GRI 2019 Partial TCFD
report
201-2 Financial implications and other risks and opportunities due to climate change GRI 2019 *D
Standard: Anti-corruption 2016
103-1,2,3 Management approach GRI 2019
205-2 Communication and training about anti-corruption policies and procedures ASR 40, GRI 2019
205-3 Confirmed incidents of corruption and actions taken GRI 2019
ENVIROMENTAL CATEGORIES
Standard: Energy 2016
103-1,2,3 Management approach GRI 2019
302-1 Energy consumption within the organization ASR 57–58, GRI 2019
302-2 Energy consumption outside of the organization ASR 57–58, GRI 2019
302-3 Energy intensity ASR 57–58, GRI 2019
302-4 Reduction of energy consumption ASR 57–58, GRI 2019
Standard: Water 2018
103-1,2,3 Management approach GRI 2019
303-1 Water withdrawal by source GRI 2019 *D
Standard: Emissions 2016
103-1,2,3 Management approach GRI 2019
305-1 Direct (Scope 1) GHG emissions ASR 57–58, GRI 2019
305-2 Energy indirect (Scope 2) GHG emissions ASR 57–58, GRI 2019
305-3 Other indirect (Scope 3) GHG emissions ASR 57–58, GRI 2019 *C
305-4 GHG emissions intensity ASR 57–58, GRI 2019
305-5 Reduction of GHG emissions ASR 57–58, GRI 2019
Standard: (Effluents and) Waste 2016
103-1,2,3 Management approach GRI 2019
306-2 Waste by type and disposal method GRI 2019
Standard: Supplier environmental assessment 2016
103-1,2,3 Management approach ASR 55, GRI 2019
308-1 New suppliers that were screened using environmental criteria ASR 55, GRI 2019
308-2 Negative environmental impacts in the supply chain and actions taken ASR 55, GRI 2019

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 OTHER INFORMATION 2019 GRI INDEX

SOCIAL CATEGORIES
Standard: Employment 2016
103-1,2,3 Management approach ASR 65, GRI 2019
401-1 New employee hires and employee turnover ASR 65, GRI 2019
Standard: Labor management relations 2016
103-1,2,3 Management approach ASR 68, GRI 2019
402-1 Minimum notice periods regarding operational changes ASR 68, GRI 2019
Standard: Occupational health and safety 2018
103-1,2,3 Management approach ASR 66, GRI 2019
403-1 Occupational health and safety management system GRI 2019
403-2 Hazard identification, risk assessment, and incident investigation GRI 2019
403-3 Occupational health services GRI 2019
403-4 Worker participation, consultation, and communication on GRI 2019
403-5 Worker training on occupational health and safety GRI 2019
403-6 Promotion of worker health GRI 2019
403-7 Prevention and mitigation directly linked by business relationships GRI 2019
403-8 Workers covered by an occupational health and Safety management system GRI 2019 *D
403-9 Work-related injuries ASR 66, GRI 2019 *D
Standard: Training and education 2016
103-1,2,3 Management approach ASR 66, GRI 2019
404-2 Programs for upgrading employee skills and transition assistance programs ASR 66, GRI 2019
Standard: Diversity and equal opportunities 2016
103-1,2,3 Management approach ASR 69, GRI 2019
405-1 Diversity of governance bodies and employees ASR 69, GRI 2019
Human rights
103-1,2,3 Management approach (combined for all human rights topics) ASR 42, 61, GRI 2019 The main report-
ing structure is
406-1 Incidents of discrimination and corrective actions taken GRI 2019
based on The
407-1 Operations and suppliers in which the right to freedom of association GRI 2019 UN Guiding
and collective bargaining may be at risk Principles
408-1 Operations and suppliers at significant risk for incidents of child labor GRI 2019 Reporting
framework.
409-1 Operations and suppliers at significant risk for incidents of forced or GRI 2019
compulsory labor
412-1 Operations that have been subject to human rights reviews or impact assessments ASR 42, GRI 2019
Standard: Supplier social assessment 2016
103-1,2,3 Management approach ASR 55, GRI 2019
414-1 New suppliers that were screened using social criteria ASR 55, GRI 2019 *D
414-2 Negative social impacts in the supply chain and actions taken ASR 55, GRI 2019
Standard: Customer health and safety 2016
103-1,2,3 Management approach ASR 51, GRI 2019
Assessment of the health and safety impacts of product and service ASR 51, GRI 2019
categories

226
 OTHER INFORMATION 2019

ANNUAL GENERAL MEETING, APRIL 8, 2020 PRELIMINARY PUBLICATION DATES

The Annual General Meeting of AB Volvo will be held in Göteborg in Annual General Meeting 2020 April 8, 2020
­Konserthuset, Götaplatsen, Wednesday, April 8, 2020. Report on the first quarter 2020 April 23, 2020

Notice Report on the second quarter 2020 July 17, 2020

Those who wish to participate must be recorded as shareholders in the
share register maintained by Euroclear Sweden AB on April 2, 2020 and
give notice of intention to attend the meeting no later than April 2, 2020:
• by telephone, +46 8 402 90 76, notice of intention
to attend the ­meeting could be given by telephone no later than 4.00 p.m.
on April 2, 2020
• by mail addressed to AB Volvo (publ), “AGM”, c/o Euroclear Sweden,
P.O. Box 191, SE-101 23 Stockholm, Sweden
• on AB Volvo’s website www.volvogroup.com or volvogroup.se
Report on the third quarter 2020 October 20, 2020
The reports are available on www.volvogroup.com and
www.volvogroup.se on date of ­publication and are also sent
electronically to shareholders who have advised Volvo that they wish
to receive financial ­information.
Historical and current time series reflecting the Volvo Group’s market
information are published regularly on www.volvogroup.com and
on www.volvogroup.se.

When giving notice, shareholders should state their: CONTACTS

• name
• personal registration number (corporate registration number) Investor Relations:
• address and telephone number Christer Johansson +46 739 02 25 22
Johan Bartler +46 739 02 21 93
• name and personal number of the proxy, if any
Anders Christensson +46 765 53 59 66
• number of any accompanying assistant(s) (maximum two) E-mail: investorrelations@volvo.com

To be entitled to participate in the annual general meeting, shareholders Corporate Responsibility:

having their shares registered in the name of a nominee must request the Martina Klaus +46 31 323 45 64
nominee to enter the shareholder into the share r­ egister. Such registration, Jonas André +46 739 02 63 80
which can be temporary, must have been effected by April 2, 2020 E-mail: csr@volvo.com
and should therefore be requested well in advance of April 2, 2020.
Aktiebolaget Volvo (publ) 556012-5790
Investor Relations, VGHQ
VOLVO’S ELECTION COMMIT TEE SE-405 08 Göteborg
Sweden
The following persons are members of Volvo’s Election Committee:
Tel +46 31 66 00 00
Bengt Kjell  Chairman of the Election Committee (AB
Industrivärden), appointed by the Annual www.volvogroup.com
­General Meeting
Pär Boman (Svenska Handelsbanken, SHB Pensionsstif-
telse, SHB Personalstiftelse, SHB Pensions­
kassa and Oktogonen), appointed by the
Annual General Meeting
Ramsay Brufer (Alecta), appointed by the Annual General
­Meeting
Carine Smith Ihenacho (Norges Bank Investment Management),
appointed by the Annual General Meeting
Carl-Henric Svanberg Chairman of the Board, appointed by the
Annual General Meeting

Among other duties, the Election Committee is responsible for

­submitting to the Annual General Meeting proposals for candidates
to serve as members of the Board of Directors, Chairman of the Board
and ­proposal for auditors if applicable. The Election Committee also
­proposes the amount of the fees to be paid to the Board of Directors.

227
 The Volvo Group drives prosperity through transport solutions, offering
trucks, buses, construction equipment, power solutions for marine and
industrial applications, financing and services that increase our custom-
ers’ uptime and productivity. Founded in 1927, the Volvo Group is commit-
ted to shaping the future landscape of sustainable transport and infra-
structure solutions. The Volvo Group is headquartered in Gothenburg,
Sweden, employs 100,000 people and serves customers in more than
190 markets. In 2019, net sales amounted to SEK 432 billion. Volvo
shares are listed on Nasdaq Stockholm.

AB Volvo, Investor Relations and Group Accounting

AB Volvo (publ)
SE-40508 Göteborg, Sweden
Telephone +46 31 66 00 00
www.volvogroup.com